Bollinger Bands and Keltner Channels Explained. // trading strategies basics for beginners settings

Bollinger Bands and Keltner Channels Explained. // trading strategies basics for beginners settings david moadel eleven welcome to looking at the markets with
David Modell today I just wanted to give you a brief introduction to Bollinger
Bands & Keltner channels which are rather similar but there are differences
and I just wanted to point out the similarities and differences in how you
can use both of them so right now I’m going to go to trading view dot-com I
like I like bar charts comm and another one of my favorites is
trading view dot-com these are all free to use right now so why not use them and
if you have your own trading platform on your broker you can certainly use that
as well you just have to make sure you find something that has Keltner channels
Bollinger Bands and all of your favorite indicators alright so I’ve got an apple
daily candlestick chart up here and I’ll just show you the candlesticks here they
are this is about eight or nine months worth of price action and these are our
daily candlesticks meaning that each candlestick represents one day of price
action alright so first we’ll start with the Bollinger Bands which are the more
popular one between Bollinger Bands & Keltner channels I would say Bollinger
Bands are more popular and one of the reasons they’re popular is because
Bollinger Bands have the ability to squeeze and then expand or squeeze and
release and so let’s take a look Bollinger Bands have a midline okay and
that is basically just the 20-day simple moving average the midline and then
you’ve got the upper band in the lower band the upper band is one standard I’m
sorry two two standard deviations above the midline and the lower band is two
standard deviations below the midline and that’s why you’ve got the 20 and the
two and the close meaning they’re using the closing prices to calculate all
these things all right so it’s pretty simple in concept what I do like about
the Bollinger Bands is that you can use them as a buy and sell signal if you
want to some people will buy a stock when the price
closes below the band the lower band and then other people will not buy until it
not only closes below the ball at the bottom band but they’ll wait until it
then goes and closes above the lower band that’s another way to do it what’s
good about that method wait waiting until it closes above the lower band is
that now you’ve got a little bit of confirmation that at least it’s not
gonna at least it’s not in a downtrend anymore if you buy it right after it
closes below the bottom band then the problem with that is you might be
catching a falling knife you’re buying it while it’s falling sometimes when
it’s falling fast whereas if you wait until it closes below and then closes
above the bottom Bollinger Band then at least you’ve seen a change in direction
it could be a head fake it could keep going down it could create more lower
highs and lower lows yes of course there’s no perfect indicator and there
are no guarantees in trading or in the stock market but at least you’ve got a
temporary change in direction and so in this case if you waited until the
candlesticks closed clearly closed below the bottom band and then closed above
the bottom band and then didn’t sell it until it closed above the upper band you
would have enjoyed some profits all right so that’s one way to trade it and
then some people consider if it closes above the upper band and then closes
below they can they could consider that a time to sell or even a time to short
although short selling is a more dangerous game than just going long so
be careful if you’re going to use the upper band as a short shorting signal
all right it may be safer just to use it as a signal to sell if you already
bought the stock and this works not only for stocks but for commodities
currencies crypto currencies and so on alright so those are Bollinger Bands and
I want to talk about the Bollinger Bands squeeze when the upper and lower band
get really close together oftentimes that indicates that a big move a big
breakout is going to happen it could be a break up or a break
all right break out or break down you know you don’t necessarily know which
way but you know that if it squeezes like that a lot of people would say that
a big move is about to happen and it happened here all right you had a
squeeze and then then a release okay because it’s very tense here when the
upper and lower Bollinger Bands are very close together that means that it’s
probably been going sideways for a while and so the tension is building building
and then release of the tension finally it breaks one way or the other in this
case it broke down so some people if you’re an options trading some people
will actually consider buying a straddle or strangle when there is a squeeze
there in the Bollinger Bands because you’re expecting a big move and you
might not know which half which way it’s going to happen all right
another example you’ve got something of a squeeze here not as much though I
don’t see any other huge squeezes here this is this is the best example of a
squeeze right here actually there’s here’s another one
alright there’s there’s a yeah Bollinger Bands squeeze it stays squeezed for a
long time and then finally boom the breakout the release and then the
Bollinger Bands expand there alright so let’s compare that to these are
Bollinger Bands let’s compare these two Keltner channels which are similar but
different notice that Keltner channels don’t
really have squeezes and releases not in the same way that Bollinger Bands do
they really squeeze and really release okay so for options traders Bollinger
Bands may be better for that sort of thing the squeeze and release play now
if you want something that’s a little steadier maybe you’re not into the you
know the really narrow channels and really wide channels maybe you want
channels that pretty much are steady as far as the width
okay then Keltner channels would be better for you in that case and that
could be an advantage you know because with the Bollinger Bands if you’re
waiting for for it let’s say the Bollinger Bands are really wide okay
then if you’re waiting you’re waiting around for a candle to break above or
below you might be waiting for a long time okay because the
can be really wide you don’t get as many opportunities when you get these wide
bands it’s very difficult to get a break clearly above or break clearly below
whereas with the Keltner channels since they’re not as wide you might get more
opportunities to trade if you’re waiting for a close below or close above all
right now some people actually put both they’ll put both up the Keltner channels
and the Bollinger Bands and by the way I’ve got the Keltner channels also on
twenty and two just like the Bollinger Bands twenty and two alright so I’ve got
both up here and it may be confusing looking alright but it is interesting
you can actually put both up there and you could have a strategy where you know
what I’m gonna wait until a candlestick closes below both of them and you
because sometimes the Keltner channels are further out and sometimes the
Bollinger Bands are further out alright and so if it could be a very
conservative strategy where you have you’re gonna wait until it closes below
both of them and then you get some real confirmation there alright or you can
wait until it closes below and then above just like with the Bollinger Bands
okay and then to sell you don’t sell until it closes till it breaks clearly
above both of them and you don’t know which one’s going to close above at any
on any given day because again sometimes the the Bollinger Bands are further out
like here sometimes the Keltner channels are further out like here it is
interesting that sometimes you get the Bollinger Bands inside of the Keltner
channels like here you got the Bollinger Bands here and the Calvert Keltner
channels further out further you know the the top band is further up in the
bottom band is further down that that’s a real squeeze I mean look how tight
that is when the Bollinger Bands are actually tighter squeezed than the
Keltner channels that’s a real squeeze and then you can see that squeeze is
likely to release we may not know which direction but we saw a big move up after
this pretty tight squeeze here to say the
least and so if the Bollinger Bands go inside of the Keltner channels that
could be four options players a real opportunity
all right so that’s my quick primer have my quick introduction but wait what the
calendar channel is it’s the same ideas you got the midline and he got the upper
band and lower band it’s very similar you just choose which one you like
better whether you know if you want to go on the wild side okay if you don’t
mind something that has you know it gets really narrow and really wide sometimes
you can go with you look at why this is getting here it’s hard to trade
sometimes when it’s really wide alright and it can be confusing if you want
something that’s a little more conservative just easier to handle
notice that it can get wide but not as wide it’s it’s more steady with the
Keltner channels and sometimes people even put both up there just for
confirmation alright I hope this was helpful to you
if you want more help with indicators trading investing you really need to
have a trading or investing plan if you don’t then you’re just setting yourself
up for failure really so you can contact me anytime by email my name is David
Modell and my email address is David Modell M la de l at thanks a
lot and please give this video a thumbs up
on YouTube and leave a comment and subscribe to my youtube channel alright
I really appreciate it thanks a lot and I’ll talk to you again soon

13 thoughts on “Bollinger Bands and Keltner Channels Explained. // trading strategies basics for beginners settings”

  1. Thank you David, this is excellent! I have a tutorial on how to sign up for on my channel if anyone needs assistance.

  2. David,Thanks for the info particularly about the squeeze recognition. As always – very informative. Thanks again!

  3. Mr.David Moadel, I have a question about whether I can somehow understand using candle stick or technical analysis tools that smart money is entering in any share where investment will be profitable. If you know please response and requesting you to make a video on this topic.

Leave a Reply

Your email address will not be published. Required fields are marked *