📊 TECHNICAL
MA Envelope
Plots two bands a fixed percentage above and below a moving average, forming a simple price channel used to spot overextension and trend-following entries.
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Live Demo — MA Envelope applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is MA Envelope?
Moving Average Envelopes predate Bollinger Bands. Instead of scaling bands by standard deviation, an envelope offsets a chosen moving average by a fixed percentage on each side, creating a channel that widens only when the trader changes the percentage.
Formula
Middle Line = MA(N)
Upper Band = MA(N) x (1 + Pct/100)
Lower Band = MA(N) x (1 - Pct/100)Parameters
| Parameter | Default | Description |
|---|---|---|
| MA Period (N) | 20 | Lookback for the underlying moving average |
| MA Type | SMA | Simple or Exponential moving average as the centerline |
| Envelope % | 2.5% | Fixed percentage offset applied above and below the MA |
Signal Interpretation
- A close above the upper envelope suggests price is statistically overextended upward.
- A close below the lower envelope suggests overextension downward.
- In ranging markets, band touches often mark short-term reversal points.
- In strong trends, price can ride along one band for an extended period.
- A narrowing gap as the MA flattens often precedes consolidation.
Tips & Best Practices
- The right percentage is instrument- and timeframe-specific.
- Re-check the percentage periodically as typical volatility changes.
- Combine with a trend filter to distinguish mean-reversion setups from healthy trend continuation.