Envelopes and Methods of Price Containment
prices. Other price‐containment methods like Keltner and STARC bands may
also see some bandwidth increase at higher prices but that is attributed to the
larger ATR values associated with the central value that tend to accompany higher
prices. As we will see in a subsequent section, the visual anomaly associated with
the fixed percentage bands may be normalized by simply employing a logarithmi-
cally scaled chart. See Figure 12.7.trading with the band: entries, exits, and stoplosses
There are two basic approaches with respect to trading the bands, namely the:- Breakout Entry
- Reversal Entry
Figure 12.5 Various Degrees of Band Responsiveness on the Daily Chart of the
Technology Select Sector SPDR ETF.
Courtesy of Stockcharts.comFigure 12.6 Band Responsiveness with Respect to Averaging Method (EMA vs SMA)
on the Daily Chart of the Technology Select Sector SPDR ETF.
Courtesy of Stockcharts.com