Bollinger Bands Trading Strategy w/ Keltner Channels // Bollinger Bands Explained Stock Trading 101 Options Trading Strategies welcome to looking at the markets with David Moadel today we're going to talk
about Keltner channels bollinger bands and how we can use them the right way to
use them and in my opinion the wrong way to use them so let's start out with just
some examples so you can see what I'm talking about
and right now i'm using stock charts . com which as of today August
twenty-fourth 2016 it is free to use they also have a 10 it says they have as
a 10-day trial so I I i guess they have pay services as well but i'm just using
the free features and they they work really well for me so you might want to
try those out
alright so let's take a look at the netflix chart this is the daily chart
and the red lines are the Keltner channels on the standard settings and
the blue lines are the bollinger bands
with the the standards set standard settings of 20 . and to two standard
deviations so standard standard settings here for bollinger bands are 20 and to
all right and they see the these are not only the bollinger bands and the Keltner
channels can both serve as indicators of overbought and oversold levels but
what's great about the Bollinger Bands is that they really can also be used as
volatility indicators or or you can measure volatility with it when the
Bollinger Bands squeeze or contract in other words when the the blue lines here
the Bollinger Bands get close together that means that the the stock has been
moving sideways for awhile it it has not been volatile lately
and when it it starts to finally have some some big moves that's when the
Bollinger Bands expand
alright so you get a squeeze and then oftentimes after the squeeze you get a
release all right or a tightening and a you know a widening i guess you can call
it that Keltner channels are more subdued in terms of you know how how
wide they get that they stay and I know if you can see it because there's a lot
going on here but if you can just focus your eyes on the red lines which are the
Keltner channels you can see that they don't expand and contract all that much
compared to the bollinger bands and so you don't get as much of a reading or or
you get a very subdued reading as far as volatility goes you don't get much
expansion and contraction compared to the Bollinger Bands where you can see
the expansion and contraction very clearly
compared to the Keltner channels now if you want to know are let's say you're
looking at the bollinger bands and you want to know you know what when is a
squeeze happening when is a period of low volatility happening in other words
how tight to the bands have to get before i can say that there is
complacency or or lack of volatility or a squeeze
well what you can do is go to stock charts . calm and go down and put on
both the bollinger bands and the Keltner channels and you can put them on their
standard settings if you want to like I do and when the Bollinger Bands both of
them are inside of the Keltner channels that means the top and bottom band are
are within or inside of the Keltner channels you can call that a squeeze you
can call that a contraction and you can say wow
right now the the band's the bollinger bands are really tight
and so there's complacency and complacency in in the market and and
this especially in that stock price and you can expect to break out to happen at
some point maybe even soon
no guarantees of course but netflix is a perfect example at the point where the
you know the both of the the band's the bollinger bands came within the counter
channels are right about here and then look at that
big move afterward ok so if you had purchased a straddle or strangle right
here you probably would have done pretty well alright so that's just one example
here if we look at some other examples we've got a blackberry here and we can
see the Bollinger Bands actually it's hard to see here but both of the bands
both the bollinger bands are within the Keltner channels right here and they had
a nice move right after that happened
ok so if you had purchased a straddle or strangle here you might have you know
for a shirt short term trade a few days you might have done pretty well the
bollinger bands came within the color channels right here and nice move right
after that
alright again this doesn't happen every single time but it you know it you can
see a pattern here here is ambarella and the bollinger bands are both they both
came within the counter channels right about here and had a nice down move
right after that he had purchased a straddle here or strangle
you might have done pretty well you got a nice move out of that one
alright and then one more example this is X which is US Steel bollinger bands
came both within the counter channels right about here and you got an up move
there you would have done well for a short term trade again if you made a
volatility play here you know buying a straddle or strangle for example and the
Bollinger Bands both came within the calendar channels here and you want a
nice down move right after that
so those are those are just a few examples it doesn't it does not happen
like that every time it is possible for the Bollinger Bands to to be within the
calendar channels and and to continue going sideways for a while that does
happen but if you're going to count on volatility picking up or if you if you
just want to know you know when you know what what is a Bollinger Band squeeze
when is it when should it be be considered a squeeze or contraction
yeah that's one way that's one indicator when both of the bollinger bands are
within the Keltner channels so if you'd like more assistance with technical
indicators with stocks options or just putting together trading plan if you
don't have one then you really ought to have one
by all means you can contact me at any time my name is David Modell and my
email address is David Modell @ gmail.com last name is spelled m.o.e ADL
and if this video was helpful or if you just like it
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alright so I hope this was helpful and feel free to contact me anytime I hope
to hear from you soon