Lesson 21 : Strategy Series - Keltner Channel Squeeze Play

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Lesson 21: Strategy Series - Keltner Channel Squeeze Play

Hi guys & Happy New Year!

Following on from lesson 20 and the introduction to some of my most profitable technical trading strategies, this week I want to revisit the Bollinger Bands and help you really maximise the profit potential that this tool offers.

This week I am going to bring you up to speed on one of the mist profitable trading strategies in my tool bag; the keltner Squeeze Play.

The Keltner Channel Squeeze Play is a trade premised on volatility. It actually begins with identifying a lack of volatility for the forex pair that you are trading. In other words, a market is trading with below average volatility by the market 's historical data. The Keltner Channel Squeeze
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As discussed in Lesson 20, the Bollinger Band consists of three lines that are plotted for each candlestick close on the timeframe of the chart you are using. Essentially a simple moving average with two standard deviations derived from the closing price of the candlestick. The simple moving average minus two standard deviations derived from closing prices. Different settings in the Bollinger Band can be set as the period of the simple moving average and the number of standard deviations used. I suggest using the default settings Bollinger Bands: Length 20, Standard Deviation, 2

The technical and statistical term is “standard deviation.” Understanding this term is the key to understanding how a Bollinger Band detects and displays market volatility.

Simply put ‘standard deviation’ is determined by how far the current closing price deviates from the average closing price. The calculation for computing standard deviation is rather complex but the general concept is that the further the closing price is from the average closing price the more volatile a market is considered to be that is essentially what determines the degree of contraction or expansion of a Bollinger Band.

The Bollinger Bands Challenge

I would like to highlight the core challenge to trading the Bollinger Bands as a trading strategy in and of itself, whilst the Bollinger Bands do give excellent trading information from a
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