# Moving Average Envelope

Moving Average Envelopes are percentage-based envelopes set above and below a moving average.

# Moving Average Envelopes

**Moving Average Envelopes** are percentage-based envelopes set above and below a moving average.

## Calculation of Moving Average Envelopes

Moving Average Envelopes are superimposed on a stock price chart. The moving average, which forms the base for this indicator, is either a simple or exponential moving average. Each envelope is then set the same percentage above or below the moving average. This creates parallel bands that follow price action.

**Application of Moving Average Envelopes**

With a moving average as the base, Moving Average Envelopes can be used as a trend following indicator. However, this indicator is not limited to just trend following. The envelopes can also be used to identify overbought and oversold levels when the trend is relatively flat.