Keltner Channels or Bollinger Bands?

[Nowler]

Hey folks,
Was doing a bit of reading on various indicators and I am aware that Keltner Channels are based on Average True Range, while Bollinger Bands is based on Standard Deviation.

For those of you that use 1 of these...
Why use one over the other?
Or
If you use both, how do you determine which to use at a given time?


Thanks in advance!

 

[piphoe]

i tried both more than a few times...trying to fade i can't use either they don't help me. a trend just kills me can you help me use them effectively?

 

[Nowler]

i tried both more than a few times...trying to fade i can't use either they don't help me. a trend just kills me can you help me use them effectively?

Are you just using that solely as your trigger for a trade?

When I use them I am looking for price to leave the channel but I am also looking at previous price structure to inform my view on where price might go or where price might struggle. In forex, fundamentals are quite important too, so that's another indicator that you need to keep in mind.

I am a fan of mean reversion trading, so when a trade is highlighted to me by the band/channel, my target is the mean of the channel (middle line of the 3)

It's still too early for me to know what's what, so be careful when listening to anything I say as it's influenced by a level of naivety.

Roughly speaking, I look for the direction that fundamentals indicate a particular pair is going in and then take setups to that side. So if for example the GBP/JPY fundamentals indicate to me that the GBP is stronger, then I will look for where price pops outside of the channel to the downside and then I go long. Targeting the mean

Perhaps those who actually know how to trade properly can give you a better answer

 

[piphoe]

Are you just using that solely as your trigger for a trade?

When I use them I am looking for price to leave the channel but I am also looking at previous price structure to inform my view on where price might go or where price might struggle. In forex, fundamentals are quite important too, so that's another indicator that you need to keep in mind.

I am a fan of mean reversion trading, so when a trade is highlighted to me by the band/channel, my target is the mean of the channel (middle line of the 3)

It's still too early for me to know what's what, so be careful when listening to anything I say as it's influenced by a level of naivety.

Roughly speaking, I look for the direction that fundamentals indicate a particular pair is going in and then take setups to that side. So if for example the GBP/JPY fundamentals indicate to me that the GBP is stronger, then I will look for where price pops outside of the channel to the downside and then I go long. Targeting the mean

Perhaps those who actually know how to trade properly can give you a better answer

no worry appreciate your reply! hopefully few others will help here

 

[Nowler]

Further to my initial post:

Are Bollinger Bands/Keltner Channels better suited to particular FOREX timeframes?
I ask because there are news releases very often, as in, fx is largely driven by news/economic policy, so perhaps this means that BB's/Keltner's are better suited for lower TF's as opposed to higher.

My logic here is that the longer the TF the more potential for a release of some sort to change sentiment. So using it (when price leaves the channel) would perhaps be better on a 1-4hr TF than say 1D or weekly...? Because the shorter the TF, the more chance I can get in and out before a release steamrolls me

 

[Nowler]

Just going to bump this one last time before I let it die.

Perhaps those who use them or know a lot about them have been busy eating turkey and ham sandwiches

 

[timsk]

. . . Why use one over the other?
Or
If you use both, how do you determine which to use at a given time?

Hi Nowler,
There are hundreds upon hundreds of indicators out there, almost all of which come with default settings that each trader tweaks in an attempt to find the magic combo' that unlocks the door to untold riches. Add in the use of two or more indicators together and that makes the possible number of permutations almost infinite.

Now, you can go from one indicator to the next in search of the holy grail if you want - but I wouldn't recommend it. It's much better IMO to start at the end and work backwards. That way, you'll stand a much better chance of finding the right indicator and being able to determine the right settings for the job. So, for example, suppose you want a way to determine where to place your stops that isn't just above or below swing highs and lows - or obvious areas of S&R - which is where most traders put them. And you want to take volatility into account so that your stop is dynamic and in sync with the instrument you're trading. In this example, Keltner Channels may be helpful and are certainly worth considering.

Putting any and all indicators in a vacuum and trying to decide which is best is largely pointless because, without context, no indicator is any better or worse than any other. This assumes obviously that you feel indicators at least have some merit and aren't the spawn of the devil! So, to conclude, I suggest you answer this question: what is it that I want the indicator to do - what am I trying to achieve? Once you've got that answer, then finding the indicator that does what you want will be a whole lot easier.

If you've already done as I suggest and have boiled your choice down to Keltner Channels or Bolly Bands - then this article compares and contrasts the two.

Hope all that makes sense.
Tim.

 

[Nowler]

Yes, that makes sense.
I'll make a cuppa and have a read of the link you gave me.

Thanks very much mate.

 

[Nowler]

My brokers platform doesn't have Keltner's, but does have STARC bands... would that be close enough?
Surely if it's Keltner's (ATR based) that I want, then even if STARC bands weren't exactly "close", they would be closer than Bollinger's (SD based)?

Note: The "ATR" it offers is an indicator below the chart. Not bands on the chart

 

[piphoe]

STARC is an acronym for Stoller Average Range Channels. The indicator is named after its creator, Manning Stoller.

 

[Nowler]

My brokers platform doesn't have Keltner's, but does have STARC bands... would that be close enough?
Surely if it's Keltner's (ATR based) that I want, then even if STARC bands weren't exactly "close", they would be closer than Bollinger's (SD based)?

Note: The "ATR" it offers is an indicator below the chart. Not bands on the chart

Nevermind.
I'll test it out myself sure.

I've altered the setting of the STARC to the typical settings of a Keltner.
Granted this is an SMA instead of an EMA but I'l see how it goes.
I can always plot a EMA separately and just reduce the colour of the SMA so it's less visible... then again... that's not right either... meh...

 

[Brumby]

Are Bollinger Bands/Keltner Channels better suited to particular FOREX timeframes?

I am afraid you are potentially entering what is commonly described as the death spiral in trading. You feel that your pathway to improvement is via better indicators or system and so you begin to search for a "better" tool. Unfortunately many traders can spent years in the wilderness searching but never finding "it". Hence it is called the spiral of death.

I ask because there are news releases very often, as in, fx is largely driven by news/economic policy, so perhaps this means that BB's/Keltner's are better suited for lower TF's as opposed to higher.

My logic here is that the longer the TF the more potential for a release of some sort to change sentiment. So using it (when price leaves the channel) would perhaps be better on a 1-4hr TF than say 1D or weekly...? Because the shorter the TF, the more chance I can get in and out before a release steamrolls me

If you cannot directly address timsk's question then you will not be able to address the TF question.

 

[Nowler]

I am afraid you are potentially entering what is commonly described as the death spiral in trading. You feel that your pathway to improvement is via better indicators or system and so you begin to search for a "better" tool. Unfortunately many traders can spent years in the wilderness searching but never finding "it". Hence it is called the spiral of death.

Hopefully not, but noted, thanks.
I feel I am just tasting a little bit of everything. Seeing what I like best or what I can follow more easily.

If you cannot directly address timsk's question then you will not be able to address the TF question.

Tim said: "what is it that I want the indicator to do - what am I trying to achieve?"

I understand what Tim means here and it was taken onboard. This is a sensible way to look at it of course...the dog wagging the tail as opposed to the tail wagging the dog (or the tools working for me as opposed to...), but I haven't built up enough of an understanding about trading yet to be able to instinctively know what indicators best work for each different instance.

Therefore, I'm scanning through indicators, seeing what sort of approaches there are, ergo, building up a particular understanding which I reckon will get me to a level of competency where I can instantly rattle off which tools might best work for each situation I encounter.

 

[Brumby]

I haven't built up enough of an understanding about trading yet to be able to instinctively know what indicators best work for each different instance.

... your statement begs the question. Is your trader development about becoming a better trader or finding better indicator(s) in making trade decisions for you? This opens up a bunch of fundamental issues that in my view are important considerations. For example, is trading 80 % psychological? Your beliefs determine your time allocation in trader development.

One of the main issue in the search of a better indicator is that success or failure in trading is attributed to the "indicator" and not the "trader". You tweak, you curve fit and then eventually you move to another indicator. The effort is therefore on a better indicator rather than to become a better trader.

 

[Nowler]

... Is your trader development about becoming a better trader or finding better indicator(s) in making trade decisions for you?

The goal is to become the best trader I can be. I do that by understanding as best I can. I am merely looking around, trying different things, trying to better understand the puzzle I am dealing with. I am looking at this puzzle through different lenses... sometimes I will recognise a new perspective, sometimes I don't. Indicators are not at the top of my list of priorities, I am merely gathering information because they can be useful.

This opens up a bunch of fundamental issues that in my view are important considerations. For example, is trading 80 % psychological? Your beliefs determine your time allocation in trader development.

Is that a rhetorical question or are you actually eliciting a response?
Saying that trading is 80% psychological is useful when trying to point out that psychology is very important...that it is often the biggest hurdle. But is it 80%? Is it 80% all of the time or only some of the time? Trading becomes less psychological the more you automate for example. So if you are eliciting a response then you have not supplied enough information for me to answer. At my level of trading proficiency I probably wouldn't be able to accurately quantify what % a particular style/strategy was anyway. But as I said, psychology is very often the biggest hurdle.

One of the main issue in the search of a better indicator is that success or failure in trading is attributed to the "indicator" and not the "trader". You tweak, you curve fit and then eventually you move to another indicator. The effort is therefore on a better indicator rather than to become a better trader.

I understand.
My first response in this post feeds in here also.

I need more time for the dust to settle.

 

[Brumby]

The goal is to become the best trader I can be. I do that by understanding as best I can. I am merely looking around, trying different things, trying to better understand the puzzle I am dealing with. I am looking at this puzzle through different lenses... sometimes I will recognise a new perspective, sometimes I don't. Indicators are not at the top of my list of priorities, I am merely gathering information because they can be useful.

"Becoming the best trader that you can be" is noble as an aspirational goal but can be rather meaningless as a developmental goal without the key components in bringing aspiration to fruition. A major challenge for every self directed trader as you are is that the pathway can easily be one of trial and error with many unfruitful effort. It is a catch 22 of elimination through a painful process. IMHO, having an aspirational goal will get you no where. What you need is a program just as with any self development program. It means you need structure. You need practical goals that you can aim for in your skills development; a process where your efforts are captured for evaluation; deficiencies that can be identified and re-programmed; and data sets to measure ongoing performance.

If you recall, I once asked you whether you have a trade plan for each trade that you take. Having a trade plan is the foundation of a trader's development program. It forces discipline and a trade process; it forces you to document your trade set ups and enable post evaluation; it measures your trade discipline in stop management and profit taking; the statistical output enables you to work on your overall expectancy be it RR or win rate ratio. In contrast knowing your win loss % is meaningless and non actionable other than questioning whether you need a different indicator.

Is that a rhetorical question or are you actually eliciting a response?
Saying that trading is 80% psychological is useful when trying to point out that psychology is very important...that it is often the biggest hurdle. But is it 80%? Is it 80% all of the time or only some of the time?

Don't get too fixated whether trade psychological is predominant or 80 % is the right level as I was just using an example. At each state of our development the needs are different as they are unique to each trader. I am simply questioning whether you have reconcile your time allocation to your identified priorities and whether your priorities are in sync with your required skills development.

Trading becomes less psychological the more you automate for example. So if you are eliciting a response then you have not supplied enough information for me to answer. At my level of trading proficiency I probably wouldn't be able to accurately quantify what % a particular style/strategy was anyway. But as I said, psychology is very often the biggest hurdle.

Is trading ever going to be less psychological with automation, I have my doubts but that is a subject for another day.
If you were to list three things you would priortise for self development what would they be and why? Only you can make that judgement.

 

[Pat494]

Hi Nowler,
: what is it that I want the indicator to do - what am I trying to achieve? Once you've got that answer, then finding the indicator that does what you want will be a whole lot easier.

Tim.

2 good questions.
In short my answer is
1. direction of prices
2. wealth.

 

[Nowler]

"Becoming the best trader that you can be" is noble as an aspirational goal but can be rather meaningless as a developmental goal without the key components in bringing aspiration to fruition. A major challenge for every self directed trader as you are is that the pathway can easily be one of trial and error with many unfruitful effort. It is a catch 22 of elimination through a painful process. IMHO, having an aspirational goal will get you no where. What you need is a program just as with any self development program. It means you need structure. You need practical goals that you can aim for in your skills development; a process where your efforts are captured for evaluation; deficiencies that can be identified and re-programmed; and data sets to measure ongoing performance.

If you recall, I once asked you whether you have a trade plan for each trade that you take. Having a trade plan is the foundation of a trader's development program. It forces discipline and a trade process; it forces you to document your trade set ups and enable post evaluation; it measures your trade discipline in stop management and profit taking; the statistical output enables you to work on your overall expectancy be it RR or win rate ratio. In contrast knowing your win loss % is meaningless and non actionable other than questioning whether you need a different indicator.

Yes, of course. Hopes and dreams won't get me there on their own. I said "to be the best trader I can be" to encompass both of the choices you gave me in the question about development. I am aware that knowing a lot about any 1 thing will not make me a profitable trader. It will take an understanding of much more individual things, but also to extrapolate a eclectic/synergistic understanding from all. Indicators are a part of the game and can be used to good effect sometimes. Because of this, I feel it's smart for me to keep looking through different indicators, to see how they work. This, particularly in the early stages of trading development, can be quite useful ways to learn a new perspective of trading that I otherwise was oblivious of.

I do struggle with a structured approach. Or lack of I should say but I am coming around to it. I can increasingly see the benefits of having a defined plan, and also the pitfalls of being too fluid. Even the stats from myfxbook have helped a lot already but in terms of getting some meaningful statistical understanding of my style or strategy it's impossible if I don't have a well defined plan. How can I know what is and isn't working when no 2 consecutive trades are guided by the same rules/criteria?

Don't get too fixated whether trade psychological is predominant or 80 % is the right level as I was just using an example. At each state of our development the needs are different as they are unique to each trader. I am simply questioning whether you have reconcile your time allocation to your identified priorities and whether your priorities are in sync with your required skills development.


Is trading ever going to be less psychological with automation, I have my doubts but that is a subject for another day.
If you were to list three things you would priortise for self development what would they be and why? Only you can make that judgement.

I don't have it well defined but I know it is going to take time. So much time that I have happily accepted that this going to be a life-long endeavour, at least in some manifestation. It's not just about making money. It's largely about me being challenged! Being able to be the sole architect of my rise, or my fall! With this, I can build something something for myself, from the ground up, brick by brick. And for that I will put in the work!

I have been thinking about your question on the three things I would prioritise for the last 30 mins...
I have priorities but trying to clearly define them in order of rank is difficult...

I'm going to ponder it a bit more while I devour this Chinese food (that the Chinese apparently dont even eat).

 

[Nowler]

If you were to list three things you would prioritise for self development what would they be and why? Only you can make that judgement.

These are not in order of rank, but are the top 3 priorities as I see it at the moment.

Fitness - I mean this both mentally and physically. Each has its own benefits but one also promotes the other. Physical exercise will obviously have it's wonderful effects; healthy blood and hormone levels, healthier body composition (fat:muscle mass) as well as organ health and de-stressing. As you know, de-stressing not only has physical effects, but also mental. Then looking at it from a mental health or mental exercise point of view, that obviously has it's noticeable effects including mindfulness and perceived quality of life and then loops back around to physical benefits again!


Knowledge - This is self explanatory (the more knowledge about trading I have, the more potential I have). I predominantly mean trading knowledge but it's not limited to it as the understanding of somethings - although they may not present obvious transferrable benefits - can present unique and creative opportunities in other non-traditionally related areas. Schemata complexity, essentially.

Organisation - This essentially relates to the efficacy of what I mentioned above, and much more. The more organised I am, the finer I can tune and the more accurate and prepared I am. Good organisational skills can help me train my body and mind more and to do it smarter. This can also be said for my trading. Which begs the question...why if I am already aware of this, why am I not already implementing it? I have been increasing my understanding of basics in trading, including terms and phrases...tool also and whatnot but I need to step it up. By establishing a few avenues/procedures of carrying out my trading, be it research or execution/management of trades it takes a load off my working memory capacity, which is already very limited. So in a cognitive sense, it could likely make things easier, or at least in a sense of it being tidier. By establishing said avenues/procedures should, in theory, have a positive impact on my trade outcomes, or at the very least will make it easier for me to identify issues and rectify them. Being organised will almost definitely help psychologically. Another aspect of being organised that I should probably work on is getting up earlier. I stay up late and get up late. I am strongly considering getting up far earlier...getting on an hour before the open of the London session



Note: The longer I am trading, the easier it is to see the wood from the trees. When I first started I was overwhelmed when listening to other traders talking. Simple terms like hitting resistance, divergence, confluence etc would require a lot of cognitive processing (naturally enough as it was all new to me). But now after some time being exposed to all this stuff, I now instantly understand certain things, therefore requiring far less cognitive processing that I can now allocate to other things. After more time I will understand those better, requiring less cognitive processing, freeing up capacity for new aspects.

 

[Signalcalc]

These are not in order of rank, but are the top 3 priorities as I see it at the moment.

Fitness - I mean this both mentally and physically. Each has its own benefits but one also promotes the other. Physical exercise will obviously have it's wonderful effects; healthy blood and hormone levels, healthier body composition (fat:muscle mass) as well as organ health and de-stressing. As you know, de-stressing not only has physical effects, but also mental. Then looking at it from a mental health or mental exercise point of view, that obviously has it's noticeable effects including mindfulness and perceived quality of life and then loops back around to physical benefits again!


Knowledge - This is self explanatory (the more knowledge about trading I have, the more potential I have). I predominantly mean trading knowledge but it's not limited to it as the understanding of somethings - although they may not present obvious transferrable benefits - can present unique and creative opportunities in other non-traditionally related areas. Schemata complexity, essentially.

Organisation - This essentially relates to the efficacy of what I mentioned above, and much more. The more organised I am, the finer I can tune and the more accurate and prepared I am. Good organisational skills can help me train my body and mind more and to do it smarter. This can also be said for my trading. Which begs the question...why if I am already aware of this, why am I not already implementing it? I have been increasing my understanding of basics in trading, including terms and phrases...tool also and whatnot but I need to step it up. By establishing a few avenues/procedures of carrying out my trading, be it research or execution/management of trades it takes a load off my working memory capacity, which is already very limited. So in a cognitive sense, it could likely make things easier, or at least in a sense of it being tidier. By establishing said avenues/procedures should, in theory, have a positive impact on my trade outcomes, or at the very least will make it easier for me to identify issues and rectify them. Being organised will almost definitely help psychologically. Another aspect of being organised that I should probably work on is getting up earlier. I stay up late and get up late. I am strongly considering getting up far earlier...getting on an hour before the open of the London session



Note: The longer I am trading, the easier it is to see the wood from the trees. When I first started I was overwhelmed when listening to other traders talking. Simple terms like hitting resistance, divergence, confluence etc would require a lot of cognitive processing (naturally enough as it was all new to me). But now after some time being exposed to all this stuff, I now instantly understand certain things, therefore requiring far less cognitive processing that I can now allocate to other things. After more time I will understand those better, requiring less cognitive processing, freeing up capacity for new aspects.

Also, don't forget to work on your bull$hit filter, arguably THE most important skill to learn in the world of trading (and elsewhere) :smart: