Envelope (ENV): An Overview of this Trading Indicator

15 juin 2022•6 min read

As a beginner trader, understanding various trading indicators is vital. One of the indicators that traders often use is the Envelope (ENV) indicator. In this article, we will delve into what this indicator is, how it works, and how it can help traders with their predictions.

What is Envelope (ENV)?

Envelope (ENV) is a technical analysis indicator that traders use to predict market trends. This indicator consists of two bands: the upper band (which is usually plotted two standard deviations above a moving average) and the lower band (plotted two standard deviations below the moving average).

The band's main goal is to act as a trading range in which the price of an asset should remain. When the price breaks above the upper band, it is considered a bullish signal as it indicates that the assets are being overbought. Conversely, when the price falls below the lower band, it is considered a bearish signal as it indicates that the assets are being oversold.

How does Envelope (ENV) work?

The Envelope indicator helps to identify overbought and oversold levels in the market. It accomplishes this by comparing the price of an asset to its moving average, which is calculated over a specified period.

Traders use this indicator to help them identify buying and selling opportunities based on the price's position in relation to the bands. If the asset's price is trading above the upper band, traders may consider selling or taking profit. Conversely, if the price is trading below the lower band, traders may consider buying or entering a long position.

How to use Envelope (ENV) in trading?

To use the Envelope indicator, traders need to first plot their moving average on their trading chart. The indicator's bands are then calculated as two standard deviations away from the moving average. This can be done manually or through the use of trading software.

Traders can then use the position of the price in respect to the bands to make trading decisions. If the price is trading near the upper band, traders may consider selling, while if the price is near the lower band, traders may consider buying.

However, traders should not rely solely on the Envelope indicator as it may generate false signals in certain market conditions. It is important to use this indicator together with other technical analysis tools.

Advantages of Using Envelope (ENV)

The Envelope indicator is easy to use and interpret, making it ideal for new traders. Additionally, it can be used on any time frame, making it versatile and suitable for all trading styles.

The indicator can also help traders identify trend reversals and potential price breakouts. This can help traders take advantage of trading opportunities and make profitable trades.

Conclusion

Envelope (ENV) is a popular trading indicator that traders use to predict market trends. By identifying overbought and oversold levels, traders can make informed trading decisions and take advantage of buying and selling opportunities.

However, traders should not rely solely on this indicator and should use it together with other technical analysis tools. With practice and experience, traders can use Envelope (ENV) to make profitable trades and achieve their trading goals.