Envelopes and Methods of Price Containment
The type of moving averages that are used to calculate central values include:■ (^) Simple Averaging
■ (^) Exponential Averaging
■ (^) Linear Weighted Averaging
■ (^) Wilder’s Averaging
band Construction
The construction of the bands may be based on any of the following measures:
■ (^) Volatility
■ (^) Percentage
■ (^) Fixed Value
Bands may also be categorized as either:
■ (^) Price dynamic
■ (^) Price static
A price‐dynamic band is one where the values of the bands change with price.
A price‐static band is one where the values of the bands do not change with price
until the bands are invalidated by a penetration, such as the upper and lower
bands of horizontal channels and Darvas boxes. Price‐static bands are usually also
referred to as channels rather than as envelopes. See Figure 12.4.
Figure 12.4 Price‐Dynamic and Price‐Static Bands/Channels on the 5‐Min Chart of
AUDUSD.
Source: MetaTrader 4