Last week I sent you a piece introducing you to a trading tool known as Bollinger bands. I know a lot of traders use these.

And I gave you some ideas about how you can get them working in your trading. Keep the emails and comments coming in about that idea. I want to talk about Keltner channels — something FRU reader, CK, will be pleased to hear. And as CK rightly pointed out, Keltner channels are often compared to bolly bands.

Most commonly used with the day moving average , Chester Keltner initially used these channels for commodity trading.

This shows the Keltner channels blue lines with standard default settings applied to a EURUSD daily chart. By itself, this is not a profitable system on average.

And used as a common breakout technique, it can be very effective.

There are several common techniques for detecting squeezes. This is just one simple one I think you can take away and use. The idea of a squeeze is to act as an early warning system.

It can alert you to a potential breakout. See, in a squeeze, price is trading in a very tight range. Orders are building up on either side.

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Of course, there are no guarantees. There never are with these markets that we trade. First, on your charting software, plot a Keltner channel with a period simple moving average and 1. At time of writing, I was up rather late working on a new system. I got an alert on my 30 minute chart. So now I had my alert and a trigger point. My play in this instance is to wait for a pull back towards the midpoint then enter in the direction of the breakout.

My stop loss is bright red. These are simply multiples of my stop loss distance extended up. We can see in the chart above that actually this one nearly stopped me out as it spiked to the downside!

But then it continued in its original breakout direction. So I manually closed this a bit below that point. But if I was paying a little more attention, I would have noticed the second squeeze and could actually look for another long entry. Maybe consider using this alongside marked up support and resistance levels as well.

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Simple Keltner Channel Trading Strategy

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You can lose some or all of your investment, so never risk more than you can afford to lose. Seek independent advice if you are unsure of the suitability of any investment. How To Trade Breakouts With Keltner Channels. A simple, but effective tool OK, so a Keltner channel is really just a channel between two moving averages. Simply, a touch or close above the upper band is a bullish signal strong up trend.

A close or touch below the lower band is a bearish signal strong down trend.

Have a look at this chart: But as a concept, it works pretty well. The technique I want to focus on today is called a squeeze. Why this fuel is past its sell-by date by David Stevenson Posted June 16, Is a US recession on the cards?

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