Envelope Channel
Bands drawn a fixed percentage above and below a moving average.
Formula
Upper Envelope = Moving Average x (1 + Percentage); Lower Envelope = Moving Average x (1 - Percentage)
Unit
%
In depth
Envelopes are the simplest band construction and the least adaptive: the width is a fixed percentage that does not respond to volatility, so the bands are too wide in quiet conditions and too narrow in turbulent ones. That is precisely the defect Bollinger Bands and Keltner Channels were designed to correct, which makes the envelope useful mainly as a teaching contrast. Its one advantage is that the percentage is chosen deliberately rather than emerging from a statistic, so the band means something specific to the user. No forecast attaches to a touch of an envelope.
Worked example
A 20-period average of ₹500 with a 4% envelope gives bands at ₹520 and ₹480. If daily volatility doubles, those bands stay exactly where they are, while Bollinger Bands would widen from ₹24 to ₹48 on either side.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Envelope Channel” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.