Momentum Analysis and Momentum Signals

The Moving Average Envelope indicator creates two lines around the price forming a channel. The upper and lower channel lines are drawn at an equidistant level above and below the Moving Average. The distance to draw the envelopes is calculated using a percent or a number of pips.

MA Envelope

Trading Analysis & Generating Signals

MA Envelope can be traded using several different rules. Main method of generating signals is to use the price penetrating the upper channel or lower channel.

Bullish Signal

Price penetrating the upper channel is a long buy signal.

Buy Signal

Bearish Signal

Price penetrating the lower channel is a short sell signal.

Sell Trade Signal

In a trending market the Moving Average points upwards in an up trend market or downwards in a down trending market. It is good to use the envelopes together with other indicators such as trendlines so as to confirm the signals generated.