Envelope-ATR Bands Using Weighted Averages and Volatility

Summary

The Envelope-ATR indicator builds a central line from a 21-period weighted average of closing prices. It sets the upper band from a weighted average of highs plus 2.618 times a 14-period Average True Range, and the lower band from a weighted average of lows minus the same volatility adjustment. The close-based average serves as the channel’s midpoint, while the high- and low-based averages define its boundaries.

The indicator also colors its display according to the envelope’s slope: rising conditions receive one treatment, falling conditions another, and sideways conditions a third. This makes the tool a visual way to frame price relative to a volatility-adjusted channel and to distinguish broad directional states. The document provides the calculation and display logic, but no entry or exit rules, market examples, or performance tests. It therefore describes an indicator construction rather than a validated trading strategy.

Key ideas

• The middle line is a 21-period weighted average of closing prices.
• The upper and lower bands use weighted averages of highs and lows adjusted by 2.618 times a 14-period Average True Range.
• The channel display distinguishes rising, falling, and sideways conditions using slope-based coloring.
• The document provides indicator calculations but no trading rules or performance evidence.

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