Now take a look at the following
5 minute chart. It is a chart of the previous trade which was a 25 minute chart.
The idea of a 5 min chart is to get the best possible entry after the evening star pattern has formed.
When the 3 candles of the evening star are complete (
on the upper BB !!) and the 4th candle starts we then set up a 5 minute chart.
On the 5 min chart we set up the usual Bolinger bands.
We now also enter on it the
Keltner channel.
The Keltner channel is a probability channel. Candles outside this channel are likely to stay outside and go up or down depending on the trend. The Keltner is based on Average True Range and, as such, is a volatility based indicator.
It is extremely sensitive to volatility and has
very little lag to it.
Look at the following hyperlinks :
Capture Profits Using Bands And Channels
Trading the BSE using Keltner Channels
My
settings for this Keltner channel are a little unusual -
period 5, factor 1. This makes sure that most of the price action is inside the channel (intended).
The Keltner channel is shown shaded grey on the chart below. Further discussion on this post is below this chart >>>
By
tymen1 at 2008-03-10
>>> As you can see, the middle BB is going down. The Keltner is also going down.
Price action is now going down and it is ,therefore, important to get in immediately ie trade short
right now. No time to waste.
The time is 15.05 on both the 25 and 5 min charts, and , if you are really quick, you would get in at the 71 pip mark shown on both these charts.
These charts have taken a very long time to produce on Microsoft Paint. Emphasis has been given to clarity and ease of reading.
The purpose of the Keltner channel will become clear as we go along.
For now, note that a 5 minute chart with a Keltner now gets used to get precise entries.