Keltner Channel Ind

Beginner Questions
3

Hi,

Glad to see some more people have been reading ‘Mastering The Trade’??? Am I right???

Pip Daddy has answered everything according to my understanding (except that Mr Carter goes long or short depending on the direction of the breakout in relation to the + or - value of a momentum indicator).

The one thing that I have found is that there does not seem to be ‘de facto’ default settings for Keltner Channels i.e. John Carter uses HIS parameters and if you look on the Internet you’ll find others that state that THEIR parameters are the default parameters and this will make a difference to how this setup works i.e. to quote John Carter: ‘how narrow is narrow’ (referring to the Bollinger Bands). Problem is that by changing the Keltner Channel parameters you are then ‘defining’ your own ‘narrow’ and then again: ‘how narrow is narrow’??? See my point.

Also: most trading platforms that I have seen don’t include Keltner Channels BUT I have the formula (found on numerous places on the Internet) so if you need it ‘coded’ into whatever platform you’re going to use then let me know and IF I CAN I will do it for you i.e. depends on the platform itself although having said that it’s really not a complicated thing to ‘code’.

4

Thanks Folks,

I just needed re-assurance that Keltner Channel will FOLD inside BB when BBs are contracted…

Qtn. to Dpaterso:

For [B]BB21[/B] settings, what settings do you recommend for Kelt. Channel ?

Mave

5

Thanks Folks,

I just needed re-assurance that Keltner Channel will FOLD inside BB when BBs are contracted.

[U]Qtn. to Dpaterso:[/U]

For [B]BB21[/B] settings, what settings do you recommend for Kelt. Channel ?

Mave

6

Hi,

I cannot ‘recommend’ any settings because I don’t trade using Bollinger Bands and Keltner Channels i.e. I just know of the system because I have the book ‘Martering The Trade’ by John F. Carter.

Like I said: you’ll find many different ‘supposed’ ‘default’ settings for Keltner Channels on the Internet. Which ‘default’ settings are INDEED the ‘default’ settings I could not tell you.

7

Check out Tymens thread, The Joy Of Candlestick Trading, he’s got an interesting use for Keltner.

8

Thank you VulcanClassic, for supporting my thread.

I have done some research on the Keltner and exploit it for all it is worth in trading candlesticks.

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 [U]very little lag[/U] to it.

Even so, I use it only on a 5 minute chart, ie the main chart chopped up into little bits.

I find the “squeeze indicator” too complex for general use in trading.

However, all these indicators still suffer from lag, and used alone will not necessarily offer better trading. To support my claim I submit the following important hyperlink :

The Trading Game

I have found that the Bolinger band, when set at one standard deviation instead of two, offers earlier entries than the Keltner. Very important pips are made earlier before the whole trade collapses. Furthermore, the Bolinger is available on every charting package. I have tested a number of different settings for the Keltner - both the period and the factor.

Exits on the Keltner are very difficult. The hyperlinks below show no decent exit methods. I have tried MACD and Stochastic (useless because they are too late), Commodity channel - takes you out too early, Fibonacci - nothing works consistantly and trailing stop loss - can you get this to meet every requirement? (I think not).
In the end a target profit seems the best solution.

The Keltner method can offer some spectacular profits but also equally spectacular stop losses - the drawdowns (with a stop loss) are such as to need a strong stomach. :eek: :eek:

In summary, I still feel that candlestick trading (the simplest type of trading), is vastly superior. The profits are almost guaranteed - and that under all conditions.
Keltner trading on its own [U]does not work[/U] in ranging markets. You are risking huge drawdowns and exits are very difficult.

[U]Final Conclusion[/U]

To me, Keltner trading and its derivatives (the squeeze indicator) are just more indicator trading methods with all their disadvantages.

Keltner trading is only for the very experienced and a pre-requisite would be a thorough knowledge of candlestick trading to allow you to spot the dangerous entries and spot safe exits before the whole trade collapses (which they do in a spectacular way).

Now the hyperlinks as promised :

http://www.investopedia.com/articles/forex/06/BandsChannels.asp

Day Trading with Keltner Channels

Online Swing Trading - Keltner Channel

Trading the BSE using Keltner Channels

9

tymen1:

No worries Dale. You, like Rhodytrader and Tonymand, are much more knowledgeable than I am.

You MUST be joking!!!

Fantastic post of yours above!!!

I agree with you totally i.e. about Keltner Channels (and ALL the other ‘Channels’) being for the very experienced (like John Carter for example). I spent a lot of time with Keltner Channels, Donchian Channels, STARC Bands, and Envelopes last year (to name a few) but as you say: the entries were relatively easy but with all of them, try as I might, the exits were the problem.

I’ve ‘gotta tell ya’ that I’ve been looking at Steve Nison’s book and I must say that the way he explains things could POSSIBLY work for me SOMETIME in the future i.e. it’s something I’ve ‘battled’ to grasp since the beginning as you probably well know. One thing I DID find interesting (sorry: I have to have a ‘dig’ here at the candlestick trading experts just for fun) is that there is a section on RSI!!! What??? RSI??? Wilder’s RSI??? Can’t be!!! NOT in a book on candlestick trading techniques surely!!! (Like I said: just a ‘dig’ for fun because you KNOW that I’m the ‘Wilder junkie’ on the site)!!!

10

I use the Squeeze indicator on my charts everyday, but I don’t use them the way TTM would instruct you to.

Think about this… what is the indicator designed to do? It alerts you when the bands constrict together right? I.e. it identifies when the market is consolidating. And as an idicator to identify consolidation is does a fantastic job.

I then just use fib grids to idenify entries on the breakouts of that consolidation.

If you can use some kind of breakout method with the squeeze it can be a very powerful tool. Just don’t use it as a standalone or as the TTM folks would instruct you too, it will take all of your money.

11

I am sure your are absolutely correct Daedalus. Good for you that it is working and making you money.

As a standalone tool - yes, I agree that your money will disappear.

But using it with something else sounds all very complicated to me and I do not see myself even looking at it, let alone using it in the near future.

12

Hi daedalus,

Can you give me the formula of this indicator please ?
I use DealBook but whatever it will come from, i think i’ll be able to translate the code to DB language.

Many thanks.

13

Hi,

Take a look here (this is on of my brokers’ charting package):

Easy financial chart.NET - Demos

BEFORE you ‘jump in’ you first need to calculate Wilder’s ‘True Range’ and ‘Average True Range’ (all of which can be found on the site).

(By the way: Carter uses 20 and 1.5 as the parameters. Just an ‘update’ i.e. I did not even realise I’d even POSTED on this thread some time back)!!!

14

:o
Thanks dpaterso but now i’m a little confused. I was asking for the “Squeeze Indicator” not the KC which i have yet in DB and use as i learn tymen method.

15

What platform do you use? There might be an indicator already coded up for it.

16

DealBook 360 from GFT…

17

Ohhhh. Sorry. I thought it was just the formula for the Keltner Channels you were looking for.

Look: the ‘TTMSQUEEZE’ indicator is just a ‘nice and tidy way’ of telling you when to trade and in what direction i.e. this you are able to do with Bollinger Bands, Keltner Channels, and a momentum indicator (Wilder’s RSI in my opinion is FAR better for this than a ‘standard’ momentum indicator) as described earlier in this thread. Personally: I’d RATHER use these three indicators seperately IF I was going to trade this ‘system’ (thus being able to actually SEE the price action on my charts as it relates to the Keltner Channels, Bollinger Bands, and a momentum indicator) than use a ‘proprietary indicator’ but hey: ‘that’s just me’!!!

And not to be ‘full of it here’ but the ‘TTM’ in ‘TTMSQUEEZE’ actually stands for ‘Trade The Markets’ (John Carters Organisation) so just be aware that it IS subject to copyright and is not released into the public domain as shareware.

18

Actually TTM ripped it off the TradeStation forums and rebranded it as their own. It is IDENTICAL to the indicator called _BB Squeeze on the TS forums available for download to anyone.

In fact, TTM’s version even has the old beta version test text called “Dummy” that pops up when you load the indicator. Their instructions to use it even make reference that the text will appear and then you need to delete it.

I have EVERY TTM indicator because they aren’t copyrighted or even their own indicators. So you’re not ripping off anything.

JC and Heubert are the ones who are ripping us off.

I saw a webinar yesterday promoting the web interface software they use on their website and John was hosting it. He says in there he makes 989k off the sales of indicators on their site and 1.2million a year off subscriptions…

Yea…

Screw em! (Heres a link to the webinar… he states what he makes about 20 minutes into it) Sam Horn Webinar_5

edit here is an actual screenshot of their indicator and instructions making reference to the dummy text… which is straight from the beta version released on Tradestation… they didn’t even bother to modify the code and remove it. So whenever they say its “their own code they modified” they are just full of you know what.

708×687

19

It’s ok, i wasn’t that clear.

Look: the ‘TTMSQUEEZE’ indicator is just a ‘nice and tidy way’

I really want to take it only for that and nothing more.
IMO an indicator is an alert, not an automated way of trading. But it just helps one to save time.

but hey: ‘that’s just me’!!!

You’re just true.

And not to be ‘full of it here’ but the ‘TTM’ in ‘TTMSQUEEZE’ actually stands for ‘Trade The Markets’ (John Carters Organisation) so just be aware that it IS subject to copyright and is not released into the public domain as shareware.

Yeah i saw that !

Thanks dpaterso.

20

Ok, i took it there.

Thanks.

21

Hello,

Yeh: I’ve heard about this copyright / ‘ownership’ ‘issue’ before too. Who knows!!!

989K???

Anyway: sorry I could not be of more help on this but I hope it works out for you (I personally DO believe that this ‘system’ has merit although having said that it’s ‘not my style’ i.e. I don’t trade anything shorter than the daily timeframe and from what I have seen combined with my knowledge of Carter’s book this works far better on MUCH shorter timeframes).

22

I really like KC a lot . Is there a book dedicated for KC only I can buy somewhere?. Tried Linda Raschke site but couldn’t find book about KC there.

Thx!