Envelopes

Envelopes

Envelopes technical indicator is aimed to identify the upper and the lower borders of a trading range. 

The indicator consists of 2 moving averages one of which is shifted upwards and another is shifted downwards. Envelops can be used as bands around price action that signify overbought and oversold levels and can also be used as price targets. 

Many traders consider Envelopes a variation of Bollinger Bands. The basic principle of both tools is the same: after any fluctuations, the price will always return to the main trend.  

How to implement

The Envelopes is included in the default set of MetaTrader. You can add it to the chart by clicking “Insert” – “Indicators” – “Trend” and then choosing “Envelopes”. The indicator lines will appear in the same window as the price chart.

A example of a trade inside the channel created by the Envelopes bands

The period set by default in MetaTrader equals 14 and the deviation (shift of the MAs) is set at 0.1%. You can adjust the amount of deviation depending on the market’s volatility: the higher the volatility is, the bigger the deviation should be. However, it’s not recommended to set the deviation above 2%.

For intraday trading, one may use an H1 chart, and a 10-period average and 0.3-0.5% deviation should be fine for any currency pair.

The 'Shift' field, which has a default value of 0, allows moving the average backward or forward along the time axis. A value of 20 moves the indicator lines forward by 20 bars, while a value of -20 would move them back by 20 bars.

How to interpret Envelopes indicator

The Envelopes indicator is based on Moving Averages and thus has the specific features and applications as other MAs do. First of all, the slope of the indicator lines show the direction of a trend: if the Envelopes bands are slopings up, it’s an uptrend, while if they are sloping down, it’s a downtrend. In addition, the indicator clearly shows the start of a sideways market as its lines become horizontal.

There are several ways to interpret the Envelopes indicator. 

Firstly, it’s possible to trade inside the channel created by the Envelopes bands: buy when the price reaches the lower band in an uptrend and sell when the price gets to the upper band in a downtrend. 

A example of a trade inside the channel created by the Envelopes bands

When the market is range-bound, the moves of the price above the upper Envelopes band signal that the asset is overbought and will likely reverse down. Moves below the lower band mean that the market is oversold and may reverse up. 

A example of a trade inside the channel created by the Envelopes bands

At the same time, when the price breaks above the upper band during an uptrend, it is a sign that this uptrend is strong and we may see a prolonged move up. When the price breaks below the lower envelope in a downtrend, it means that the downtrend is strong and the price may fall steeply. 

The Envelopes indicator can be a part of various trading strategies. For example, it may be used for scalping on small timeframes. As it’s a trend indicator, it’s possible to achieve good results by combining it with some oscillator.

Frequently asked questions

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to activate Level Up Bonus?

    Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.

Latest news

Will the RBA Add Strength to the Aussie?

The Reserve Bank of Australia (RBA) will hold a meeting and announce changes to the monetary policy on August 3, at 07:30 MT time (GMT+3).

Trade ideas for August 2-6

What events to follow and how to trade during the week of July 2-6?

EUR/USD is Ready for Reverse, Amazon's Poor Results

EUR/USD retraced to 1.1870 after breaking out this level. It should be just a natural sell-off ahead of the further rally up.

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Follow us on Facebook

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera