Ask Colin

In your article "Disciplined Trader", you refer to lines above and below the 22-day EMA. What are they?

The two lines are a percentage envelope. In this case 40% above the EMA and 40% below the EMA. This means that we calculate a 22-day EMA then increase its values by 40% for the top envelope line and decrease them by 40% for the lower envelope line.

The percentage used for the envelope varies from stock to stock. The envelope is fitted so that 90% or more (approximated by eye) of the price action falls inside the envelope.