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Registered User
Joined: 10/18/2005
Posts: 10
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Hello:
would like to know the use of period and width in the envelope channels, i.e. in charting an envelope from a moving average, which is the use of the period. it s not clear from me. regarding the width, it is in percent ? so a 5 means 5 percent up and or down de moving average. ? Thanks for your help
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Worden Trainer
Joined: 10/1/2004
Posts: 18,819
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Width is our own version of standard deviation. The width unit will be based on the volatility of the stock. Though not your typical StD, you can think of it as being like the StD times 10.
Start with a width of 15 and play with it from there, looking through charts, until you find a width setting that "looks right" to you.
- Craig
Here to Help!
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Registered User
Joined: 1/1/2005
Posts: 2,645
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QUOTE (Craig_S) Width is our own version of standard deviation. The width unit will be based on the volatility of the stock. Though not your typical StD, you can think of it as being like the StD times 10.
Those in the field of Probability and Statistics would restate the above something like:
"Width is our own version of dispersion. The width unit will be based on the volatility of the stock. Though not your typical StD, you can think of it as being like the StD times 10."
Dispersion is a generic term. For example, Standard Deviation and Mean Deviation are two specific measures of Dispersion.
I have yet to find an instance where Standard Deviation is actually used as stated in Help Topics and that same term is used to refer to entirely different measures of Dispersion.
Thanks,
Jim Murphy
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Registered User
Joined: 10/7/2004
Posts: 5
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QUOTE (Craig_S) Width is our own version of standard deviation. The width unit will be based on the volatility of the stock. Though not your typical StD, you can think of it as being like the StD times 10.
Start with a width of 15 and play with it from there, looking through charts, until you find a width setting that "looks right" to you.
Hi,
This is not right. An envelope channel is not based on Std Dev, rather a price percent around the moving average. There was post by Doug H on April 7, 2005:
QUOTE (Doug_H) Thanks for your patience. Our Help File says that the width is based on Standard Deviation. A width entry of 10 is one SD, a width entry of 20 is two SD's, etc..
However, upon investigation, we have determined that the width calculation is based on something other than Standard Deviation. This issue has been forwarded back to our development team for clarification. We are still waiting for a response from their research. Please click on the Watch This Topic link at the top right of your original post, and you will receive an email when a reply is posted to this question.
Thanks for taking the time to pose your question so clearly.
which clarifies this. Unfortunately I did not see any follow-up.
So, I'd like to ask the question again: What does the value for "Width" mean? (10 looks close to 10% but not quite).
Many thanks!
eric
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Worden Trainer
Joined: 10/1/2004
Posts: 4,308
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ehj:
If you look closely at my reply of April 7, 2005 (which you quoted above), you'll see that I never made any indication whatsoever that the channel width was based on a price percent around the moving average. What I knew at that time is that the calculation was not the actual standard deviation, as indicated in the Help file. What we have learned since, and what Craig posted above in his December 6th post, is that the channel width is based on our own version of standard deviation. It's close to the normally accepted version, but different. I do not know what the difference is, exactly.
So to clarify, the period of Envelope Channels refers to the value of the moving average which runs invisibly through the center of the channel. The channel width is based on our version of standard deviation. A width of 10 is one SD, a width of 20 is 2 SD's, etc.
- Doug
Teaching Online!
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Registered User
Joined: 10/7/2004
Posts: 5
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Okay - thanks for your response. I guess I am still a little confused.
1) Std Dev will change over time (the basis of Bollinger Bands), yet the envelope channels as plotted in TC2005 appear to be constant.
If the envelopes are based on some form of Std Dev how are they different than Bollinger Bands and what period is this Std Dev calculated over?
3) The Meyers book referenced by Don Worden in every Worden Report defines envelopes in terms of percent price above and below a moving average (p.135 3rd Ed.) Why are the TC2005 envelopes differnt than this? Is there a why to plot bands that are +/- a certain percentage from a moving average?
Many thanks,
eric
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Worden Trainer
Joined: 10/7/2004
Posts: 65,138
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First, a disclaimer... I don't know how Envelope Channels are calculated and have been unable to reproduce them using formulas. Many of the following comments are just my personal observations.
QUOTE (ehj) 1) Std Dev will change over time (the basis of Bollinger Bands), yet the envelope channels as plotted in TC2005 appear to be constant.
They may apppear constant, but I don't think they are. If you plot Envelope Channels around the DJ-30, the width is significantly different in 1915 than in 2006.
QUOTE (ehj) If the envelopes are based on some form of Std Dev how are they different than Bollinger Bands and what period is this Std Dev calculated over?
I would not personally call it Standard Deviation. I think bustermu's phrasing is pretty good:
QUOTE (bustermu) "Width is our own version of dispersion. The width unit will be based on the volatility of the stock. Though not your typical StD, you can think of it as being like the StD times 10."
QUOTE (ehj) 3) The Meyers book referenced by Don Worden in every Worden Report defines envelopes in terms of percent price above and below a moving average (p.135 3rd Ed.) Why are the TC2005 envelopes differnt than this?
I'm not going to comment on the Meyers book (I have not read it and do not own a copy). The Envelope Channel Width calculations used in TeleChart appear to be very similar to the Linear Regression Channel Width calculations:
Linear regression channel calculations
That said, and as indicated previously, I have not been able reproduce the Envelope Channel Width calculations exactly.
QUOTE (ehj) Is there a why to plot bands that are +/- a certain percentage from a moving average?
Please try the following:
Select Chart Template | Add Indicator | Price Channel.
-Visible: Checked
-Plot Formula Line: Your choice
-Smoothing Average: Your Moving Average Period
-Average Type: Simple or Exponential
-Width Multiplier: Your specified %
-Indicator Line Formula: C
-Channel Width Formula: .1 * C
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
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