You are most likely familiar with the Bollinger Bands indicator. It is one of those popular indicators that is pushed towards the beginner Stock Market and Forex Day Traders. But the Bollinger Bands is not always useful, especially if you are a trend trader. Imagine that Bollinger Bands is this road, and this middle line is the middle line of the Bollinger bands and the edges of the road are the outer Bollinger bands lines. If Bill the second was the price, and if the price didn’t move much up or down, the upper and lower bands of the Bollinger bands will move closer or pretty much stay at the same place.

Let’s say, when the price breaks out of a range or gives signs of a strong trend after a slow-moving market, you wanted to enter as soon as possible.
But if bill the second, or in other words, if the price decides to break out of the range, and starts a new trend, the outer Bollinger bands will expand. But we don’t want that. We want to enter at the start of the trend, and sure we can use other trend indicators, But what if the Bollinger bands, instead of expanding with the price, would have stayed at pretty much the same place when the price starts a new trend?

This is the normal Bollinger bands on an up-trending chart, and sure, one can say when the price is trending, we can take the trade as soon as the price breaks above the upper Bollinger band, it is a sign of increasing buying pressure in an uptrend and we can take a long position. That’s good, but this is better. This indicator looks similar to the Bollinger Bands indicator, but as you can see, the upper and lower lines are staying close to each other, and when there is a good trend going on, the price stays outside of the channel. In many cases and in this case, when the price started a good move in the upper direction, the breakout of the upper bands was earlier than the Bollinger Bands, and the price stayed above the upper bands for the most part of the uptrend. This is the Keltner Channels, and I’m going to test it 100 Times in the next video to find its win rate, just like we have tested many other strategies 100 times on the Trading Rush channel.

The middle line of the Keltner Channels is a simple or exponential moving average. But this time, the upper and lower bands are usually set two times the ATR value. So they do move away and closer to each other when the price starts trending and ranging respectively, but not like the Bollinger Bands Indicator, which makes them perfect for avoiding the ranging and trading the trending markets.

The 200 period exponential moving average will show the long-term trend direction. If the price is staying above the moving average, we will wait for the price to break and close above the upper band of the Keltner Channels, and we will enter a long position at the first candle that breaks above the upper band.
When the price is staying below the 200 period exponential moving average, we will wait for the price to break and close below the lower band of the Keltner Channels, and we will create a short position at the first candle that breaks below the lower band.

Since this is a trend following strategy, in the long setup, set the stoploss below the pullback. And in the short setup, set the stoploss above the pullback of the trend.

We will test this strategy 100 Times to find its win rate in the next video. Subscribe to Trading Rush and ring the notification bell to see that. Thanks.