Trading Success Principles Keltner Bands & Key Moving Averages · Trading Success Principles...

Trading Success Principles

Keltner Bands & Key Moving Averages

Learning to Profit from Futures Trading with an Unfair Advantage!

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The Keltner Channel Bands (16,1.3%)

Based on the market’s volatility.

A 16 period bar exponential moving average is used for the mid Keltner band.

The upper and lower Keltner bands are based off of the 16 bar EMA with a multiplier constant of 1.3%

above the mid Keltner (upper Keltner band) and a 1.3% multiplier below the mid Keltner (lower Keltner

band).

These parameters work extremely well for ANY market and ANY time frame.

2 General Uses for the Keltner Channel Bands:

1. Identifies SUPPORT in an Uptrend and RESISTANCE in a Downtrend.

2. Upside and downside mid-Keltner penetrations through the 79 SMA and 89 EMA.



© Trading Concepts, Inc. 2

SUPPORT in an UPTREND

The Keltner channel bands help identify market SUPPORT (potential BUYS) in an UPTREND.

This market SUPPORT comes into play when the market retraces down off the highest high in an

UPTREND between the MID to LOWER Keltner channel bands.

3

RESISTANCE in a DOWNTREND

The Keltner channel bands help identify market RESISTANCE (potential SELLS) in a DOWNTREND.

This market RESISTANCE comes into play when the market retraces up off the lowest low in a

DOWNTREND between the MID to UPPER Keltner channel bands.

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Upside Mid-Keltner Penetrations

When the MID Keltner penetrates UP through both the 79 SMA and 89 EMA (or 3 consecutive price

bars close with their LOWs COMPLETELY ABOVE the upper MA), the TREND generally has changed to

the UPSIDE.

The 79 SMA and 89 EMA typically will act as SUPPORT (potential BUY LONG entries).

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Downside Mid-Keltner Penetrations

When the MID Keltner penetrates DOWN through both the 79 SMA and 89 EMA (or 3 consecutive

price bars close with their HIGHs COMPLETELY BELOW the lower MA) the TREND generally has

changed to the DOWNSIDE.

The 79 SMA and 89 EMA typically will act as RESISTANCE (potential SELL SHORT entries).

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The 79 Simple and 89 Exponential Moving Averages

Essentially, a trend-following device to identify or to signal that a new trend began or that an old trend

ended or reversed.

Used in conjunction with the MFAM.

Used in determining WHEN and WHERE a TREND will begin and end:

When the mid Keltner crosses UP through BOTH the 79 SMA and 89 EMA (or 3 consecutive price

bars close with their LOWs COMPLETELY ABOVE the upper MA) and the MFAM also is bullish,

the market is starting a new UPTREND.

Both MAs should act as SUPPORT (a potential BUY zone).

When the mid Keltner crosses DOWN through BOTH the 79 SMA and 89 EMA (or 3 consecutive

price bars close with their HIGHs COMPLETELY BELOW the lower MA) and the MFAM also is

bearish, the market is starting a new DOWNTREND.

Both MAs should act as RESISTANCE (a potential SELL zone).




8 Key Moving Average (MA) Concepts to Understand

1. Rising Moving Averages (MAs) generally represent positive market action or strength.

2. Falling/declining MAs generally represent negative market action or weakness.

3. The sharper the slopes of the MAs, the stronger the market is in that direction.

4. During strong UPTRENDS, pullbacks tend to halt (act as SUPPORT) at (or near) the rising MA(s).

5. During strong DOWNTRENDS, rallies tend to halt (act as RESISTANCE) at (or near) the declining MA(s).

6. Following mid Keltner channel band penetrations of the MAs, market reactions/retracements in price back

to the MAs are very likely.

7. An upward penetration through a rising MA is considered BULLISH; therefore, good BUY opportunities

present themselves when a strong market pulls back (retraces) down to (or near) its rising MA(s).

8. A downward penetration through a declining MA is considered BEARISH; therefore, good SELL

opportunities present themselves when a weak market pulls back (retraces) up to (or near) its declining

MA(s).




Market trading ABOVE MAs:

BULLISH MAs (slanting up)

indicate a strong market that

can be bought on pullbacks.




Market trading BELOW MAs:

BEARISH MAs (slanting down)

indicate a weak market that can

be sold on rallies.




TREND Determination (UPTREND)

When the mid Keltner crosses UP through BOTH the 79 SMA and 89 EMA (or 3 consecutive price bars

close with their LOWs COMPLETELY ABOVE the upper MA) and the MFAM also is bullish, the market is

starting a new UPTREND.

Both MAs should act as SUPPORT (a potential BUY zone) when a market retraces down to (or near) its

rising MA(s).

LOW

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TREND Determination (DOWNTREND)

When the mid Keltner crosses DOWN through BOTH the 79 SMA and 89 EMA (or 3 consecutive price

bars close with their HIGHs COMPLETELY BELOW the lower MA) and the MFAM also is bearish, the

market is starting a new DOWNTREND.

Both MAs should act as RESISTANCE (a potential SELL zone) when a market retraces up to (or near) its

declining MA(s).

HIGHThe 79 SMA & 89 EMA acting as

Resistance in a DOWNTREND

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Trend Change Criteria

UPTREND Changing into a DOWNTREND (2 of the Following 3 Criteria Must Be Met:

The MRAL (i.e. the highest AL in the UPTREND) MUST be taken out to the DOWNSIDE,

The mid-Keltner MUST penetrate DOWN through both the 79 SMA and 89 EMA (or 3 consecutive

price bars MUST be trading COMPLETELY BELOW the lower moving average), and

The market MUST penetrate DOWN through 62% Fibonacci retracement of the ENTIRE DAY.

DOWNTREND Changing into an UPTREND (2 of the Following 3 Criteria Must Be Met):

The MRAH (i.e. the lowest AH in the DOWNTREND) MUST be taken out to the UPSIDE,

The mid-Keltner MUST Penetrate UP through both the 79 SMA and 89 EMA (or 3 consecutive price

bars MUST be trading COMPLETELY ABOVE the upper moving average), and

The market MUST penetrate UP through 62% Fibonacci retracement of the ENTIRE DAY.




UPTREND Changing into a DOWNTREND

When a minimum of 2 of the 3 criteria for a change in trend has been met.

HIGH

Downside Penetration of 62%

Fibs of the Day (LOW to HH)

LOW

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DOWNTREND Changing into an UPTREND

When a minimum of 2 of the 3 criteria for a change in trend has been met.

HIGH

Upside Penetration of 62% Fibs of

the Day (HIGH to LL)

LOW

NH

AL

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Two other Key Moving Averages that are Commonly used as

Support and Resistance

The 50 Exponential Moving Average (EMA) and the 200 EMA are very common among institutional and

many “at-home” retail traders alike, thus making them a self-fulfilling prophecy.

Since so many traders watch and use these moving averages, they become very powerful Support

(when looking to BUY in an UP Trend) and Resistance (when looking to SELL in a DOWN Trend).

Utilizing these moving averages will help keep you from taking otherwise potentially bad trades

against the trend of the market.




50 EMA / 200 EMA acting as SUPPORT in an UPTREND

The 50 EMA and the 200 EMA may be used to help identify market SUPPORT (potential BUYS) in an

UPTREND. This market SUPPORT comes into play when the market retraces DOWN off a NEW HIGH

and pulls back to near the 50 EMA and/or 200 EMA.

The 50 EMA acting as

SUPPORT in an UPTREND

LOW

HIGH

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50 EMA / 200 EMA acting as RESISTANCE in a DOWNTREND

The 50 EMA and the 200 EMA may be used to help identify market RESISTANCE (potential SELLS) in a

DOWNTREND. This market RESISTANCE comes into play when the market retraces UP off a NEW LOW

and pulls back to near the 50 EMA and/or 200 EMA.

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strategies shown here will result in profits and will not result in losses.

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methods shown within our Course are not and should not be construed as

an offer to buy or sell Futures Contracts – they are opinions based on

market observation and years of experience. Therefore, the thoughts

expressed are not guaranteed to produce profits in any way. All Opinions

are subject to change without notice. Each Futures trader/investor is

responsible for his/her own actions, if any. Your purchase of the Trading

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Trading Success Principles Keltner Bands & Key Moving Averages · Trading Success Principles...

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