Contents
This article will tell you everything you need to know about the indicator that is called the Moving Average Envelopes. It is uncomplicated and universal. It can be applied in various markets, no matter the volatility, and different trading systems. The Envelopes is a good indicator to know.
Key Takeaways🔑
| →The Moving Average Envelopes indicator is a versatile tool applicable in various markets and timeframes. |
| →Three common strategies can be used with this indicator: bouncing prices from sidelines, middle line, and breakthrough. |
| →Beginners can start with default settings, while experienced traders can adjust parameters to suit their strategies. |
Trading with the Moving Average Envelopes indicator on IQ Option
The Envelopes is an indicator that consists of 3 lines. They are 3 moving averages parallel to each other with the same period and even distance between.
How to add the Envelopes to the chart on the IQ Option platform
Log in to your IQ Option trading account and set the chart. Choose the asset for the session. To add the Envelopes to the chart, you have to click on the Chart analysis icon on the left side of the interface. Choose Moving Averages under the Indicators tab. You will find the Envelopes indicator on the list that will be displayed on the right side.
You can choose to adjust the indicator settings, the basic ones, the period, deviation, source or type of moving average and graphic ones which are the colours and the thickness of the lines.
As a beginner, you can leave most of the parameters unchanged. With more experience, you will want to try different combinations. You should, however, adjust the deviation according to the time frame of the chart you are using. The default moving average deviation is 10. It is good for a daily chart. If you are trading with shorter candle intervals, you will need to find the best value of deviation for yourself. For instance, for a 30-minute chart, it could be 1. And for a 4-hour chart, a deviation could be set for 5.
Deploying Envelopes trading strategy on the IQ Option platform
There are 3 common strategies that are traded often with the help of the Moving Average Envelopes indicator. These are:
- bouncing prices from the sidelines of the indicator;
- bouncing prices from the middle line of the indicator;
- breakthrough.
Bouncing prices from the sidelines of the indicator
This strategy says that you should open a trading position when the price bounces from the sidelines of the Envelopes indicator. When it bounces from the lower line, it is a signal to buy. When it bounces from the upper line of the indicator, you should sell.
This strategy works best in markets with low volatility.
Bouncing prices from the middle line of the indicator
Using this tactic you ought to enter the trade when the price bounces from the middle line of the Moving Average Envelopes indicator. When the price reaches the middle line from the bottom, you should sell. Open a buy position, when the price touches the middle line from the top.
The tactic known as bouncing prices from the middle line of the indicator gives the best results in the markets with medium volatility.
Breakthrough strategy
The last strategy is to be used in highly volatile markets.
In the breakthrough tactic, you open transactions when the price bars break the lower or upper line of the indicator. You should sell when the candle breaks through the lower line and closes below it. Open a buy position when the candle breaks through the upper line and closes above it.
Pros and Cons of the Moving Average Envelopes Indicator 📈📉
Pros:
- 👍 Applicable to various markets and timeframes
- 👍 Easy to understand and implement
- 👍 Works with different strategies for different market conditions
Cons:
- 👎 May provide false signals in highly volatile markets
- 👎 Requires adjustments to parameters for optimal results
- 👎 Not as effective when used as a standalone strategy
| Bouncing Prices Strategy | Breakthrough Strategy |
|---|---|
| Works best in low-volatility markets | Works best in highly volatile markets |
| Uses price bounces from sidelines of the indicator | Uses price breakthroughs of the indicator lines |
| Suitable for beginner and experienced traders | May require more experience to interpret correctly |
Final words
The Moving Average Envelopes indicator is a universal tool that can be applied in markets with different volatility and on various time frames. Just follow the simple rules described above and then open your transactions. Play with the Envelopes settings.
It is recommended to learn how the indicator works in the IQ Option demo account first. It is a special account where you receive virtual cash to trade. This way you do not bear any risk. Moreover, the amount in your demo account can be replenished at any time. Get to know the strategies before you move to the live account and invest your own money.
Have you ever traded with the Moving Average Envelopes indicator? Share your thoughts with us in the comments section below. You will find it further down the site.
Wish you high profits!
Q&A: Frequently Asked Questions 💡
- Q: Can the Moving Average Envelopes indicator be used in any market?
A: Yes, this indicator can be applied in various markets and timeframes, regardless of the market's volatility. - Q: What are the three common strategies used with the Moving Average Envelopes indicator?
A: The three common strategies are bouncing prices from the sidelines, bouncing prices from the middle line, and breakthrough. - Q: Is the Moving Average Envelopes indicator suitable for beginners?
A: Yes, beginners can start with default settings and adjust parameters as they gain experience. - Q: How do I adjust the deviation of the Moving Average Envelopes indicator?
A: The default deviation is 10, suitable for daily charts. You'll need to find the best value for your specific timeframe (e.g., 1 for a 30-minute chart or 5 for a 4-hour chart). - Q: Can I use the Moving Average Envelopes indicator as a standalone strategy?
A: While it can be used as a standalone strategy, it's more effective when combined with other technical analysis tools to provide additional confirmation and reduce false signals.