V.13:07 (280): SIDEBAR: Trading bands by Bruce Faber
Trading bands, or envelopes, are used as visible boundaries that contain the price movement of a security. A sell signal may be generated when the price hits the upper band and a buy signal may be generated when the lower band is touched.
Originally, trading bands were drawn by hand, using smoothed waves that coincided with the highest highs and lowest highs for the upper band, and the highest lows and lowest lows for the lower band. Using these waves as a pattern, the bands could be projected to indicate where prices might go.