3 points to use and trade Forex envelope properly
Envelope, need to adjust the deviation to match the currency pair, time frame and market price situation.
When trading with similar currency pairs, you have to fix the deviation so as not to cause unforeseen losses because of not using the envelope properly.
This time, we will introduce 3 points.
Set up the envelope correctly
When using the envelope within a 15 minute time frame, the basic setting range will be used. “Cycle 14″is fixed for any time frame.
Cycle:14
MA method:Exponential
Deviation:Adjust within 0.07% ~ 0.14%
When using the envelope with time frame above 1 hour, the deviation will be adjusted from 0.30 ~.
In addition, when the gap is large, the deviation will be 0.14% or more, although the time frame is within 15 minutes.
Try to combine with the actual chart
Furthermore, combining the envelope with the actual graph needs specific adjustment.
Deviation will vary based on the market price of each currency pair and even similar currency pairs.
Deviation:0.13%
MA Method: Displays 14EMA (See below the green line in the image
Set the deviation at the position where the price line touches the increasing volatility and decreasing volatility. This time it’s 0.13%.
In addition, increasing volativity 14 EMA in the center of the envelope is also one point.
Deviation:0.09%
MA Method: Displays 14EMA (See below the green line in the image
In the case of a 5 minute time frame EUR / JPY , the deviation is 0.09%. However, the deviation should be adjusted depending on the market price. Therefore, set the deviation on a case by case basis.
Follow the stop loss and take profit rule
Even if you can display the correct envelope, but do not follow the stop loss and take profit rules, the profit will not increase.
Envelope is a technical indicator derived from the assumption that when there is a deviation from the moving average it will come back to the moving average again.
Start time (Place an order)
Basically, the order will be placed where prices intersect with the envelope or at the price range slightly beyond the envelope.
After 14 EMA is intesected, you can place the opposite order but it is not a good method because it’s very risky.
Take-profit time (close an order)
Envelope order is closed at 14 EMA intersection point.
Where strong trends, it should be no problem even if profit is closed at the reverse envelope intersection point, but note that the risk is high.
Stop-loss time
When the chart has expanded further in the opposite direction from the line where the order was placed, do not hesitate to cut loss.
By displaying the two larger envelope lines, the decision to cut the loss is more effective.
Example of two envelope lines
Display two envelope lines with “0.13" deviation and “0.20 deviation", “deviation 0.20" is the cut loss line.
Envelope, is effective when the market price fluctuates within the large deviation but will not be favorable in the case of a strong one-way trend.
Therefore, when the trend is coming in the opposite direction of the placed order, loss cutting will be better.
In addition, if the deviation is small, you can not earn large amounts of money. So, you need to predict “send a transaction."