Adaptive Envelopes Using Standard Deviation to Scale Moving Average Bands

Summary

This document describes an adaptive envelope indicator built around a moving average. The central line is the selected moving average of closing prices; upper and lower bands sit symmetrically around it. Their width is scaled by a standard deviation measure of the high-low range's relative distance from the moving average, multiplied by a user-set deviation factor and the central value.

The indicator exposes inputs for the moving-average period and method, the deviation factor, and the deviation period. Its stated design recalculates channel size infrequently, with changes intended no more than weekly, so it can also be applied to intraday data. The material gives the calculation but no trading rules, parameter recommendations, market examples, or performance tests. It therefore explains how to construct the bands, but does not establish whether they provide useful entry, exit, or risk signals in any particular market.

Key ideas

• The indicator centers its channel on a configurable moving average of closing prices.
• Band width depends on the standard deviation of a normalized measure of high-low distance from the average.
• A deviation factor scales the calculated channel around the central line.
• The design aims to limit channel-size updates to no more than once a week.
• No trading rules or performance evidence are provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.