Mean recursion envelope

Free for public consumption


There is very little original here, the idea is discussed in the underground traders alliance, (google em), and was apparently the basis of what was at one time myfxbooks most profitable strategy.

I can't find the original video that was floating around on youtube, but if i find it again, i'll link it here.

This is bascially just the TV default envelope code copied and modified.

The idea is to have an envelope based on a low length, exponential basis. Then to manually "tune" the percent input so that the envelopes engulf most bars. Whenever price goes outside the envelopes (especially at key levels), look for a change to enter a reversion back to the ema.

This manual tuning when switching between time-frames and symbols of the percentage input, becomes arduous.

Instead this script uses the TV envelope code, but gets a setting based on the average of true range and "autotunes" with this.

Anything that protrudes beyond that level, especially at key levels, is likely to revert back to the ema. Bear in mind, a run away trend will also push past the envelopes and continue running for several (3-5) bars so, use it mindfully and thoughtfully with all the usual cautions about risk management.