Channel Explanation Please

[cpatte7372]

Hello,

I wonder if someone could explain the difference between the following types of channels:

Straight envelopes and standard deviation channels (aka Bollinger bands)

According Alexander Elder, traders of stocks are better off using straight channels or envelopes, because they keep a steady distance from the moving average, providing steadier price targets.

Also, if someone could recommend a channel that is best suited for day trading or swing trading along with a recommended formulae I would be very appreciative.

Cheers

Carlton

[DuaneG]

Hi Carlton,

The primary difference between Envelopes and Bollinger Bands is this....

Envelopes are developed using the upper and lower ends of a stocks trading range. Keep in mind that the higher the volatility, the higher the percentage difference between the upper and lower band. As far as the calculation of Envelopes is concerned, you may wish to check out the Equis Technical Analysis Center. This is the best explanation of the calculation I have come across.

In regards to Bollinger Bands, they are calculated off of standard deviation levels from the moving average whereas Envelopes are calculated off of the shifted moving average directly. As for the calculation of Bollinger Bands, you may want to check the Equis Technical Analysis Center directly as the formulas are fairly complex for this medium. Please let me know if you have any additional questions.

[cpatte7372]

Duane,

Thats great mate.

Would you happen to know which channel is best suited for day trading or swing trading?

Cheers

Carlton

[cpatte7372]

Also,

Would you happen to know of any scripts for envelopes?

Thx

Carlton

[ACM]

Carlton
Try running a Search for Bands Envelopes both in the Bulletin Board and in FileShare and you should find a lot of them
Alex

[cpatte7372]

Thanks Alex.

Carlton

[DuaneG]

Would you happen to know which channel is best suited for day trading or swing trading?

It has been my experience that most technical indicators will work on any time frame. The principal behind the study is based to function the same regardless if you are using a 1 min chart or a weekly chart. IMO, I would focus not so much on the time interval, that will be determined by your style of trading. I would however focus on understanding the behavior of the channels under different circumstances to gain a comprehensive view of what is supposed to happen and how the chart reacts to that situation. Basically it will be determined on your style of trading and what meets your needs in the most complete way. I hope this helps.

[cpatte7372]

Duane,

I think thats excellent advice.

Thanks again.

Carlton