Envelope and Moving Average

12 Jan

**Description:**
- This script creates an indicator that combines an envelope and a simple moving average (MA).
- The envelope is constructed using a specified length, percentage deviation, and source price (close by default).
- The moving average is calculated based on a specified length and source price.

**Inputs:**
1. Envelope:
- Length: Number of periods used for the envelope calculation (default is 20).
- Percentage Deviation: Percentage above and below the envelope basis (default is 10%).
- Source: The price used for the envelope calculation (default is close).
- Exponential MA: Option to use exponential moving average for the envelope basis (default is false).

2. Moving Average:
- Length: Number of periods used for the moving average calculation (default is 20).
- Source: The price used for the moving average calculation (default is close).

**Plotting:**
- The script plots the envelope basis, upper envelope line, and lower envelope line.
- The area between the upper and lower envelope lines is filled with a semi-transparent color for better visualization.
- The moving average is plotted on the chart with a specified color and line width.

**How to Use in a Strategy:**
1. **Envelope Crossovers:**
- Go Long (Buy): When the close price crosses above the upper envelope line.
- Go Short (Sell): When the close price crosses below the lower envelope line.

2. **Moving Average Crossovers:**
- Go Long (Buy): When the close price crosses above the moving average.
- Go Short (Sell): When the close price crosses below the moving average.

3. **Confirmation:**
- Consider additional confirmation signals or filters to improve the robustness of your strategy.
- For example, you might require a certain amount of price momentum or use other technical indicators in conjunction with envelope and moving average signals.

4. **Optimization:**
- Experiment with different parameter values (e.g., envelope length, percentage deviation, moving average length) to optimize the strategy for specific market conditions.

5. **Risk Management:**
- Implement proper risk management techniques, such as setting stop-loss orders and position sizing, to control risk.

Remember to thoroughly backtest any strategy before deploying it in a live trading environment. Additionally, consider the current market conditions and adapt your strategy accordingly.