A complete example: Long POT

[Pascal]

Good question indeed Harry.

It is not the number of time that the price pokes outside of the envelope that we count to set the envelope size, but it is the total length of the bars that is outside of the envelope compared to the total length of each bar. We want that less than 10% of the length of all bars fall outside the envelope.


Pascal

Hello Pascal,

I am trying to better understand the envelope calculated by the breakout calculator. You state "We can see below that the 2.4% envelope captures 90% of all the price bars for the analysis period." This essentially means only 1 of every 10 bars (on average) should break the envelope. From the naked eye, it certainly looks like more than 1/10 bars break the envelope if you count the # of break vs. # bars. I annotated visible breaks below.

Attachment 28400

Is this simply due to the envelope was created using a longer data set than the figure shows? From the naked eye, the envelope looks too tight to capture 90% of the moves. Maybe the envelope is calculated using closes vs. high/low? Any insight is greatly appreciated.

Harry

[Harry]

Thank you - makes sense to me now.