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46 lines
1.7 KiB
Markdown
46 lines
1.7 KiB
Markdown
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# Moving Average Envelope
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Moving Average Envelope consists of three lines: a moving average in the middle and two lines plotted at a fixed percentage above and below it. The envelope provides a simple way to identify potential support and resistance levels based on a percentage deviation from the average price.
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## Calculation
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```
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Middle = MA(Source, Length)
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Upper = Middle + (Middle × Percentage/100)
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Lower = Middle - (Middle × Percentage/100)
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```
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Where:
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* MA = Moving Average (can be SMA, EMA, or WMA)
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* Source = Price series (typically close price)
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* Length = Lookback period for moving average
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* Percentage = Fixed percentage for band width
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## Parameters
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* Source (default: close) - Price series used for the moving average
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* Length (default: 20) - Period used for moving average calculation
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* Percentage (default: 1.0) - Fixed percentage distance from MA to bands
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* MA Type (default: 1) - Moving average type: 0:SMA, 1:EMA, or 2:WMA
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## Interpretation
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* The middle line shows the average price trend
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* Upper and lower bands create a channel based on fixed percentage
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* Price reaching the bands may indicate overbought/oversold conditions
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* Unlike volatility-based bands, envelope width changes proportionally with price
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* Band penetration may signal potential trend reversals
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* Works best in trending markets with consistent volatility
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## Implementation
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The implementation includes:
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* Choice of three moving average types (SMA, EMA, WMA)
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* Optimized calculations for each MA type
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* Circular buffer for efficient SMA calculation
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* Alpha smoothing for EMA
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* Linear weighting for WMA
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* Proper handling of NA values
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* Input validation
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* Percentage-based band width calculation
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