Keltner Channels Explained: Better than Bollinger Bands? // channel indicator trading strategy vs


Keltner Channels Explained: Better than Bollinger Bands? // channel indicator trading strategy vs settings strategies mt4 squeeze thinkorswim pdf david moadel welcome to looking at the markets with
David Modell today I’m going to give you a quick introduction to Keltner channels
and I’m going to compare them to Bollinger Bands so here we go alright
I’m on stock charts dot-com want to give them credit and we’re looking right now
at the Lumber Liquidators stock daily candlestick chart each candle represents
one day of price action and I put the Keltner channels up there on the
standard settings which is great for swing trading of course you can use this
on different time frames as well day traders can use Keltner channels long
term buy and hold investors can use them as well you just have to change the
settings alright so you’ve got the the upper channel in the lower channel and
the mid line it’s a lot like Bollinger Bands where you have the the upper band
in the lower band and the mid line so it’s pretty much the same thing as
Bollinger Bands where if if the candlestick touches or pierces the
bottom line then that means that it’s relatively cheap or oversold and that
means you can buy it if you want to because it’s on sale it’s a bargain
and when it reaches you know touches or pierces the upper line that means that
it’s overbought or expensive which means that if you already own it maybe if you
bought it down here you can sell it when it reaches or pierces that upper band
there all right so for example you could have bought it here and sold it here and
then bought it here waited a while and then finally sold it here when it
pierced the upper line there and so on and so forth okay now if you already
know about Bollinger Bands then you may notice that Keltner channels are very
similar except notice that Keltner channels keep the same width between the
lower line and the upper line it stays about the same width pretty much always
even when there are extreme price movements like for example with Lumber
Liquidators at the beginning of august there was a large jump up here due to an
earnings report there was an earnings beat alright and so there was an extreme
price movement here as happens sometimes when there are earnings reports but even
with extreme price movements the you know that the lines don’t don’t get too
wide or too narrow alright they pretty much stay the same
distance between the upper and lower lines there alright and so it’s kind of
a steady indicator it’s not very extreme alright so right now I’m going to
compare this gonna go down on stock charts and I’m going to compare this to
the Bollinger Bands so you can see the difference alright so we’re gonna put
both up there and it might be a little bit confusing but the blue lions are the
Keltner channels you were just looking at those and now I also added the
Bollinger Bands and notice how much wilder and crazier the Bollinger Bands
are okay if you look at this here we are
here’s the earnings beat and an extreme price movement to the upside you see how
the Keltner channel is pretty much they get a little bit wider but not much okay
they pretty much stay about the same distance same width between the the
liens here whereas the Bollinger Bands look how skinny you know how tight the
band’s got here okay there was a squeeze here and it got really narrow here and
then after this earnings beat suddenly they got really wide very very wide so
this is pretty extreme and yes Bollinger Bands are great if you’re trading
options and you want an indicator to tell you when you know if there’s a
squeeze it might tell you that volatility is low and then when the
band’s the Bollinger Bands get really wide that might tell you that volatility
is much higher much greater okay so I have to admit that Keltner channels
don’t give you those those squeezes and those releases to the same extent that
Bollinger Bands do however if you want something a little steadier something
that doesn’t have extreme you know differences between the width because
this might be hard to trade if you’re the type of person that likes to buy at
the lower band and then sell the upper band you know when it when it’s that
narrow with the Bollinger Bands it’s hard to trade it you’re not gonna make
much money I mean what are you really gonna buy it here and then sell it here
you’re not gonna make much money that way okay it’s too it’s too tight at
least the Keltner channels give you some breathing room here at least it doesn’t
get this tight and also when it’s extremely wide I mean you know
when it gets this wide or what are you gonna wait till it gets all the way down
here before you buy it and then wait until it goes all the way up it’s not
even on the chart anymore the top the upper Bollinger Band okay so it’s it
might be difficult if you’re gonna buy low and sell high to really trade with
Bollinger Bands sometimes when it gets extremely narrow or extremely wide
whereas the Keltner channels are much steadier as you can see when it comes to
the width all right let’s also take a look at will do Domino’s Pizza how about
that one let’s compare that one we’ll put up first we’ll just put up the will
take away the Bollinger Band so you can look at just the Keltner channels
alright and that’s under overlays here on stockcharts.com alright so as we can
see yes there I remember there was an earnings report in late July
is there any earnings miss obviously and it went down even more and by the way
that’s why I tell people use the use the three day rule after a big earnings miss
wait three days before you buy it and this is a perfect example because it’s
likely to keep going keep going down over the next few days alright so if you
had bought three days later you would have done pretty well but anyway so
these are Keltner channels and again yeah they get a little bit skinnier a
little bit wider but you could still buy when it pierces the lower channel here
and then sell when it reaches the upper line here Ritson repeats so on and so
forth and it’s very steady even when there are extreme price movements
movements like we see with this earnings miss the Keltner channels don’t get that
much wider and so you can still trade them perhaps more easily if you’re gonna
buy low and sell high let’s compare that again to Bollinger Bands which is right
here under overlays and we can see yeah look look see look
how skinny let look how tight the bands are here alright it’s kind of hard to
trade this if you know you’re gonna buy here and sell here you’re not gonna make
much money that way alright when it gets that you know that tight alright and it
gets tight here and then extremely wide to the point where it might be hard to
trade might be hard to buy at the bottom band and sell the top one when they’re
this wide alright whereas the Keltner channels the width is pretty steady here
and it remains that way and so that’s an advantage for people who would rather
trade that way by the lower band sell at the upper line so on and so forth killer
channels may be the way to go for you alright and so it’s a simple strategy
that you can use with Keltner channels it’s not for everybody some people
prefer the Bollinger Bands they like they like the fact that they get skinny
and wide so they can gauge or measure how volatile the stock has been recently
so try both check them out maybe even put one on top of the other and really
test them out to see which one you like better alright so I hope this is helpful
to you that was just a really brief introduction to Keltner channels and how
I would compare and contrast them to Bollinger Bands because they are similar
in many ways alright so if you’d like more help with putting together a
trading or investing plan if you have questions about indicators you want some
help with them you can contact me at any time my name is David Modell and my
email address is David Modell at gmail.com thank you so much for watching
this I hope that you’ll give this video a like and
please leave comments if you liked the video and please subscribe to my youtube
channel so you can receive the latest updates on my financial educational
videos thank you so much I really appreciate it and I’ll talk to you again
soon thank you for watching please like comment and subscribe and I’ll see you
next time

25 thoughts on “Keltner Channels Explained: Better than Bollinger Bands? // channel indicator trading strategy vs”

  1. Nice Job! very clear and simple analysis with specific examples that shows the pros and cons of Bollinger Bands and Keltner Channel. I know, I'm professional in business for 45 years. Joe Colell

  2. another great video..thanks. When I hear something I don't understand or have never heard of this is where I go…..1. investopedia 2. DAvid Moadel youtube video

  3. You explained the Keltner channels really well David… I like this strategy and I'll remember this for next time! thank you

  4. It's always funny for me to hear, that it's hard to earn any money when BB gets narrow on the daily chart. It's always about the risk and lotsize. Why do you think you will earn more on daily chart when BB gets thicker, if you put then a trade there with risk:reward ratio for instance 1:3, risking for instance 1% of your equity. You can do that same anytime if you just go to H4 or H1 or M5 chart and risk there same 1% of equity and have same risk:reward of 1:3. You can always earn (or lose) big money also on M5 or even M1, if you just go with bigger lotsize or you can get out better risk:reward, except that you can make there more than just few trades in one day (or one hour), comparing to get same profit on daily (or weekly) chart. What's use of trading on daily chart, if you then let yourself to risk only 1% of equity and have 1:3 risk:reward. That won't let you earn more than 3% if you close at the first TP. Same you can do also on M5. So why losing time waiting that the BB get thicker on daily chart, if you can make many trades also on much smaller time frames? It's NOT about the pips. It's more about the risk and lotsize and risk:reward. That's what brings you money (or loss), not having many pips whikle having still small risk and lotsize, just because you want to have more pips. I hope you understand my point. All the best! 😉

  5. https://www.youtube.com/watch?v=pJn3imUD-8Q&t=323s

    not selling anything, was inspired by the music in your videos so i made some videos…

  6. As always, the obscure explained simply. I had never heard of keltner bands before tonight. Definitely something to look into. thank you for taking your time to explain that which us novices do not understand.

  7. You should see what happens when you set the std. Deviation to 1. Lines become even more streamlined.
    Potential trades occur when price breaks out from the upper or lower band. Pair that with an RSI to confirm the strength of the direction and you're all set

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