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Moving Average Envelope

A moving average band, or envelope, forms a channel or zone of commitment around a moving average. A moving average is calculated first, and then a band above and below the average is calculated.

Formula:

Upper Band: images/aspen00000331.gif

Where:

UB = upper band

MAt = current moving average value

U% = upper percentage value

And:

Lower Band: images/aspen00000332.gif

Where:

LB = lower band

MAt = current moving average value

L% = lower percentage value

The moving average in a moving average envelope can be calculated using any of the moving averages.

images/aspen00000333.gif

see, P. J. Kaufman, The New Commodity Trading Systems and Methods, New York: John Wiley & Sons, 1978, pp. 74-79.