Price channels are important tools for understanding various aspects, as well as helping to predict price behavior within a certain period. The Keltner Channel on IQ Option is certainly one of the best ways to analyze the price trend.
Price channels are important tools for visualizing and analyzing the behavior of asset prices over certain periods. They can be bullish, bearish or horizontal. Understanding the trend is fundamental to helping you make good trades.
This doesn’t mean you’ll always get it right, because there can be false signals and breakouts within the channels. These, in turn, are responsible for breaking (as the name suggests) the established channel. However, with the help of other indicators you can predict them better and even use strategies to take advantage of them.
There are different types of price channels and today we’re going to talk more specifically about the Keltner Channel, the main purpose of which is to analyze market volatility.
What is the Keltner Channel?
The Keltner Channel was created by Chester W. Keltner, a grain trader from Chicago, i.e. it is an indicator that was created for the futures market. Its initial purpose was to analyze price volatility.
Today, this indicator is very similar to the Bollinger Bands, but uses a different form of calculation. It is based on the exponential moving average and the average true range.
This allows you to identify changes in the asset’s trend. This indicator is also very similar to the Donchian Channel and even the strategies for using it are similar. We’ll even talk about strategies using the Keltner Channel on IQ Option later in this article.
As with the Donchian Channel, the distance between the two end lines indicates the volatility at the moment being analyzed. The further apart the lines, the greater the price volatility. The central line helps indicate possible trend reversals, providing good trading opportunities.
Why use Keltner Channels on IQ Option?
The degree of accuracy and ease of reading the Keltner Channel on IQ Option are the main reasons why we recommend it. In addition, the fact that it can be used for more than one purpose makes trading much easier and avoids polluting the chart too much with different indicators.
Even so, even though it is a more complete indicator, we recommend that you don’t use it and make your trades based on just one of them. The Keltner Channel on IQ Option can be complemented by other indicators.
That said, we’re going to help you with some strategies for better application of the Keltner Channel on IQ Option.
Strategies for trading the Keltner Channel
Knowing the history of indicators and the theory behind them is very important. However, knowing the actual applications and how to incorporate them into your trading strategies is even more important, as this is what will help you make money on a daily basis.
Like any other indicator, we recommend using the Keltner Channel on IQ Option alongside at least one other indicator. This is because no indicator is complete and assertive enough for a high degree of trading success.
Here are some simple strategies for using the Keltner Channel on IQ Option and increasing your chances of success.
Bollinger Squeeze
A strategy created by John F. Carter in his book Mastering The Trade, this strategy uses 2 other indicators in addition to the Keltner Channel on IQ Option: Bollinger Bands and Momentum Oscillator.
The combination of these three is intended to increase the trader’s assertiveness, with Bollinger Bands being used to indicate price range direction, the Oscillator being used to measure price changes over a given time and the Keltner Channel being intended to identify trends and reversals.
It helps to capture large movements after volatility has increased in a quiet market, in other words, trade with the trend.
To make this strategy even more assertive, you can combine the Keltner Channel on IQ Option with the MACD. If this second indicator also provides an entry reading, you’ll be able to increase your hit rate on the put or call trade.
End lines
Price movements at the ends of the Keltner Channel are good opportunities for profitable trades. If the price reaches either end of the channel, but doesn’t break through it, it is very likely that the price will return to the midline.
In other words, if the price touches the upper edge of the Keltner Channel without breaking it, this opens up a good opportunity for a put trade. However, if the price touches the support without breaking through, it could be a good opportunity for a call. In both cases, the price is likely to move towards the center line.
You can be even more assertive with this strategy if you combine it with other indicators, such as the Relative Strength Index (RSI), which will give you a more accurate reading of whether the market is overbought or oversold.
Advantages and Disadvantages of the Keltner Channel on IQ Option
It’s important to emphasize that there is no perfect, infallible indicator in trading. They all have their strengths and weaknesses and it’s very important to understand this before designing your trading strategy.
In this article, we have already mentioned most of the advantages of using Keltner Channels on IQ Option, but we cannot emphasize these aspects enough.
Advantages
One of the main advantages of the Keltner Channel (which we haven’t mentioned yet) is that it’s easy for beginners to understand and use. If you’re just starting out in trading, it’s an excellent choice because it also provides readings for more than one aspect, works for all timeframes and also for all assets.
Markets without a defined trend are often difficult to trade and bring down many traders who venture into them. This indicator works in these sideways markets and also offers good opportunities when they are highly volatile.
Disadvantages
Like any other indicator, it’s not recommended to use it on its own, as this increases the possibility of reading false signals, as in the case of breakouts.
It also uses historical data to generate its lines, which in some cases of sudden changes may not be so accurate.
How to use the Keltner Channel in IQ Option
Using the Keltner Channel on IQ Option is quite easy. After selecting your preferred chart type, click on the “Indicators” tab and then choose the “Volatility” option.
This menu will include the Keltner Channel indicator in IQ Option. Simply select it and configure it (if you wish). If you don’t want to use the default settings, you can select the period and offset you want.
After reading this article, you will learn how to use the Keltner Channel with a demo account on the IQ Option platform, and get to know the most interesting trading strategies.
