Keltner Channel - this is one of the simplest indicators, which can be considered for trading within a sideways trend, because it is important to work with him that there were no sharp jumps in price, which can eliminate your position.
Keltner channel trading strategy
Sometimes they are called this, sometimes called a Keltner channel, which marks the upper and lower boundary of the price based on the volatility of the assets.
The corridor formed by the Keltner Bands marks the area in which the price can change. It is accepted that the upper boundary is a resistance level and the lower one is a support level.
Keltner channel settings for scalping
Since the Keltner indicator is suitable mainly for a sideways trend - we will consider it for scalping, as in scalping we are ready to make many deals and work on a small timeframe.
We will choose 5 minutes as the main timeframe. It's enough to start scalping.
The first thing to do - add 4 indicators "Keltner Channel" on the chart. Then go to the settings and set the values:
- Indicator: Length 22, Mult 1
- Indicator: Length 22, Mult 2
- Indicator: Length 22, Mult 3
- Indicator: Length 22, Mult 5
Length - in a sense smooths out fluctuations and averages the values.
Mult - multiplier, to put it simply - it creates the width of the corridor of price movement.
By setting these values, we designate for ourselves the indicators that will help us make trades. This is why we set different multipliers by creating decision zones. The last fourth indicator we set with multiplier 5 to determine for ourselves the level of stop loss: its crossing is possible, but in most cases it is unpredictable when there is a sharp jump or drop in price.
Never forget that in addition to using the indicator, you need to know other things about scalping: its work, its rules and how to use it.
Keltner channel trading strategy
Now let's talk about the logic of transactions. Each of the corridors will be a price target in relation to which trades are made. You can open shorts when the price reaches a peak and open longs when the price falls to the lower levels. You cannot buy and sell within the same corridor - it is a violation of strategy.
How to short on Keltner bands
To go short, we wait for the price of the asset to enter zones 2, 3 or 4. We need to get the highest price inside our channel. But, as always, we must not be greedy and be able to average the price of the asset and our risks: for example, we can use 50% of the deposit to buy the asset in zone 2 and wait for the price to enter zone 3 or 4 and then buy the remaining amount. Don't forget that the price may not get there, but you will level out the risks this way.
Then the logic is simple: wait until the positions bought in zone 2 sink to level 1. Or positions bought in zones 3 or 4 sink to level 1 or 2. This is basically elementary logic: if you opened a short, then you must close it at a price lower than the opening. That's what these zones are for.
How to long on Keltner bands
Exactly the same logic, except it is a long: you have to sell the position for more than you bought it, then you will make a profit.
Wait for the price to move to -2, -3, -4 levels and then buy, averaging the price and splitting your orders into several pieces.
You bought a long in the -4 zone? Great, now you can make a profit even if you decide to sell long in the -3 zone.
Best keltner channel settings
The best settings are the ones you choose for yourself. Trading is a risky business, and experience comes with time. We've shown you how to use the indicator.
One of the ways to become a good trader is to practice a lot. You don't have to make real trades to do this, you can start working in the demo mode or test your hypotheses on TradingView in the "Market Simulator" section. In the same way you can try and use your settings for the Keltner channel.
Would you like to try it? Sign up, turn on the indicator and try trading small amounts of money!
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