AutoEnvelope Indicator For MT4
Table Of Contents:
- AutoEnvelope Indicator For MT4
- How to Interpret AutoEnvelope Indicator For MT4
- Simple Actionable Strategy Using AutoEnvelope Indicator For MT4
The AutoEnvelope Indicator For MT4 is a technical tool that traders can use to identify extremely oversold and overbought conditions in an underlying asset’s price. The indicator can also be useful in determining the broad trend in a market. The AutoEnvelope is overlaid on a price chart and can be effective for both short term and long term trading.
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Alerts In Real-Time When Divergences Occur
The AutoEnvelope Indicator For MT4 defines the upper margin and the lower margin of a price range. The logic behind the indicator is that over-enthusiastic buyers and sellers tend to push prices to extreme areas (i.e., the upper band and lower band), at which point, prices often stabilize to more realistic levels. However, this may not always be the case; especially during strongly trending market conditions. At such times, prices typically break above/below the AutoEnvelope and continue to move in the direction of the breakout.
How to Interpret AutoEnvelope Indicator For MT4
The AutoEnvelope Indicator For MT4 consists of a 26-period and a 13-period simple moving averages. Channel lines above and below price are drawn by calculating a standard deviation for the last “n” bars.
The AutoEnvelope Indicator For MT4 is so designed to encompass a bulk of the price action. As such, any move above or below the channel lines warrant attention. Strong trends typically start with such unidirectional moves. Prices breaking out above the upper envelope indicate extraordinary bullish pressure, while a slide below the lower envelope suggests inherent market weakness. Such kinds of strong moves often prelude the end of a trend and the beginning of another.
Since the AutoEnvelope Indicator For MT4 is constructed around moving averages, it serve as an excellent trend following indicator. However, just like most trend followers, the indicator lags price action. The important thing to note is the direction of the channel. In general, when the channel moves higher, an uptrend is present. Conversely, a downtrend exists when the AutoEnvelope moves lower. In case of the channel moving sideways, the trend is considered to be flat.
The AutoEnvelope Indicator For MT4 is also handy during range bound markets when prices oscillate from one end to the other. Any move above the upper envelope can be used as a shorting opportunity, while a move beneath the lower envelope can be used to initiate long trades.
Simple Actionable Strategy Using AutoEnvelope Indicator For MT4
Since the AutoEnvelope Indicator is lagging in nature, it’s advisable that any strategy centred on the indicator be provided with a further layer of filter in the form of an additional technical oscillator or a price pattern.
Combining the AutoEnvelope Indicator For MT4 with principles of the century-old Dow Theory should increases the success ratio as well as profitability of a system. For a long trade, we first wait for prices to convincingly close above the upper envelope and then retrace to chart a price swing high. We buy as soon as this swing high gets taken out on the upside.
Contrarily, a short trade can be initiated if price closes below the first major swing low that gets formed under the lower envelope of the indicator. This strategy can be implemented across most major Forex pairs on charts 15 minutes and higher.
