hey welcome to this tutorial on Kelner
Channel trading strategy versus Binger
bands going to do a little comparison
between these two types of envelopes and
they're called envelopes because the
lines
envelop above and below the midline and
the midline in this case we're going to
use as the 20 period moving average
which is right here so right now I have
as you can see the Kelner channel on
here got Disney and dily chart and the
one of the big differences between
Kelner channels and the Binger bands are
the kelar channels use an average true
range to set the channel distance so
these are the channels here and then
we've got a 20 period moving average
here in the middle and by the way that
is a 20 period exponential moving
average that's typically what's used for
Kilner channels now Bullinger bands
they are calculated differently instead
of using an average true range so when
people use this as a trend indicator
then primarily what they're looking for
is it for it to show an Impulse move
here strength to the upside hit the
upper Kelner Channel now see here it did
not and but here it does so that shows a
strong impulse move to the upside and
then they're looking for it not to come
back and retrace and hit the bottom
Channel and in order to maintain
strength to the upside and that uh
philosophy in general I agree with um
big part of my trading is looking for
the direction of the dominant energy in
the market and this would be one way of
doing it so that works uh very well here
in this particular situation let's look
at another one so as you see here we had
been in a downtrend and then we come
back we reverse we hit the upper Kelner
Channel and the market does continue up
and up and up and up and then it comes
back down and and well let's move the
screen forward here so you can see and
uh so in this case actually we'll just
go ahead and move it all the way
forward and you know it looks pretty
great it uh does come down and hit the
lower kler Channel and it does not come
back and reach the upper one and
continues with a nice downtrend so
that's the basic use of it the basic way
of reading it and it works pretty well
if you've got a market that is having a
rather low volatility
Trend and and Disney tends to move that
way however not all markets do so let me
show you some other examples I just I'll
show you one more now I brought up GLD
so just as a different example so on
this one we hit the lower line we go
back up hit the lower one here point
this out for you and that would indicate
an Impulse move to the downside but then
we have one uh hits to the upside which
is what we don't want in order to start
a downtrend but then it really goes down
by the way another thing to notice is
look how far price bars get below the
line so it doesn't if you get a high
volatility um Market or particular time
at a market it's not going to contain
price action very well Bullinger bands
do a better job of that one way around
this however in some uh softwares some
software programs uh you can do multiple
uh multipliers well that's good bar
multiple multipliers
so you could do uh instead of just
having one offset multiplier here uh you
could do two you could do three and
that'll help um a lot of people actually
do that and that's um good then you'll
have two bands above the mid-range and
two bands below the mid-range so that's
one way to kind of help to answer that
uh problem but again you see that we go
down here well below and then we come
back up well above and then we go back
again well below and so this is one of
the problems and one of the reasons I
said that I don't like using this as a
trend indicator is because it's
typically based on 20 periods 20 period
uh exponential moving average and the 20
bars is not enough to have a trend in my
opinion the word trend means in the
Webster dictionary the extended general
direction of something so Trend by
definition is a longterm move not a
shortterm move I think a 20 period is
too short of a term to measure Trend so
I like to go with 50 and obviously
there's room for different opinions
there that's no problem but that's my
opinion and so down and down and down we
go I've added the Binger bands now they
are the red envelopes here and here and
you'll see I'm using essentially the
same settings even though the equation
is different so I'm using the same
settings essentially that we do for the
Kelner Channel but again the equation is
different so that's why obviously they
are different now one thing you'll
notice right away is that the uh
Bullinger bands the red lines are able
to capture more or contain more price
action than the Kelner channel so the
Binger bands uh they will expand and
contract more and of course that's
because they're not based on average
true range they are based on the
standard DV ation which varies so they
measure
volatility um much better in my opinion
so I use them more for volatility then I
use them for Trend again we're using a
20 period moving average so I wouldn't
use it for Trend but uh for volatility I
think it is very good so also a couple
another thing that um I like about the
Binger bands is that not only do they
contain price action or more price
action so for example here you just get
three bars above the Kelner Channel but
here's a signal that I use a lot where
you get a real body outside of the
Binger band and to me that shows
extreme move a very very unusual High
volatility move that is generally
unsustainable so the Kelner Channel
doesn't show you that because you get so
many bars above and below it all the
time and but you don't get as many bars
above and below the buinger bands and so
it's an unusual activity and when it is
it's usually measuring exhaustion that
that move is coming to an end that's
very valuable information very valuable
so as we come down here for example we
see that uh yes we're hitting the bottom
here the two levels are pretty even but
as volatility increases the Buller band
start to move apart that's a that's a
signal of increased volatility something
that the Kelner Channel doesn't give you
then when we get down to here then this
is very important notice All These Bars
here all all those bars are below the
Kelner Channel but only these uh couple
bars here are below the Binger band when
I see that then I say oh okay Binger
band captures the vast majority of price
action and because now we have gone down
so far that we've broken below that I
think we're coming to the end of that
move
and that is a great signal that works a
lot and there you go so it comes back up
and that is the end of that down move
into that Trend if you want to measure
Trend that way if you like this video
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