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does anyone know how to automatically calculate channel (envelope) widths
like dr. elder intends? far as I can tell, this is idiosyncratic to him;
everywhere else I've found references to channels, they just mean the
general idea of constant ratio above and below an EMA.
here's what he says in Come Into My Trading Room:
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Upper channel line = EMA + (EMA * Channel coefficient)
Lower channel line = EMA - (EMA * Channel coefficient)
A well-drawn channel contains the bulk of prices, with only a few extremes
poking out. Adjust the coefficient until the channel contains approximately
95 percent of all prices for the past several months. Mathematicians call
the "second standard deviation channel". Most software packages make this
adjustment very easy.
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I don't know how to turn the reference to standard deviation into code. he
specifically contrasts channels to Bollinger Bands, which are plotted some
number of standard deviations away from the EMA.
anyone understand this better than me?
dave
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