Envelopes (ENV)

Envelopes is a volatility indicator that plots two bands around a moving average at a fixed percentage distance. Unlike Bollinger Bands which use standard deviation, Envelopes use a constant percentage offset, creating parallel bands that move with the trend. They help identify overbought and oversold conditions as well as potential breakout points.

Envelopes are calculated by adding and subtracting a fixed percentage from a simple moving average:

Middle   = SMA(close, N)
Upper    = SMA(close, N) * (1 + K / 100)
Lower    = SMA(close, N) * (1 - K / 100)

Where N is the period (default 20) and K is the percentage offset (default 2.5%).

The bands maintain a constant width relative to the moving average, unlike Bollinger Bands which expand and contract with volatility.

• Fixed-width bands — Constant percentage creates predictable channel boundaries
• Mean reversion tool — Price touching outer bands tends to revert to the middle
• Trend filter — Price consistently above/below middle line confirms trend direction
• Simpler than Bollinger — Easier to interpret since band width is constant

Buy signals

• Price touches or crosses below the lower envelope and reverses back inside
• Price crosses above the middle line (bullish momentum)
• Price bounces off the lower envelope in an uptrend

Sell signals

• Price touches or crosses above the upper envelope and reverses back inside
• Price crosses below the middle line (bearish momentum)
• Price fails at the upper envelope in a downtrend

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Number of candles for SMA calculation | | Percent | 2.5 | Percentage offset from SMA |

| Component | Description | |-----------|-------------| | ENVELOPES_UPPER(20) | Upper envelope value | | ENVELOPES_LOWER(20) | Lower envelope value |

| Condition | Description | |-----------|-------------| | close > ENVELOPES_UPPER(20) | Price above upper envelope | | close < ENVELOPES_LOWER(20) | Price below lower envelope | | close cross_over ENVELOPES_LOWER(20) | Price crosses back above lower envelope | | close cross_under ENVELOPES_UPPER(20) | Price crosses back below upper envelope |

• The optimal percentage depends on the asset's typical volatility — use higher values for volatile assets
• For stocks, 2-3% works well on daily charts; for crypto, 3-5% may be needed
• Envelopes work best in ranging markets for mean-reversion strategies
• In strong trends, price can stay outside the envelope for extended periods
• Combine with RSI or Stochastic to confirm overbought/oversold at envelope touches
• Consider using ATR-based channels (Keltner) for adaptive envelope width