As Linda Pisa, and As Linda Pisa, and Jonathan Levinson Channels Keltnera regularly used to monitor the dynamics of markets, so I decided to look closely for this indicator.
There are three types of bands moving average - envelopes moving averages, bands and Bollindzhera Channels Keltnera .. All three are composed of three lines - the average moving average and two external lines or bands. (for more details, see the previous issue). The theory of envelopes or bands based on the fact that price has the greatest chance of movement within the borders of the external lines. Prices outside the bands are regarded as extreme situations and, therefore, provide an opportunity for trade. The main differences among the types of envelopes are in the computation of the bands or envelopes, the interval between the lines or the width of the bands and how they are interpreted.
Channels Keltnera, the name given on behalf of author Chester Keltnera their technique, which he called Rule 10-day moving average in his book 1960. «How to make money in commodity markets». This price envelopes or bands, which are placed above and below the exponential moving average multiplied by its value on the value of the average True Range (ATR). That is why, I find these channels is so intriguing: they vary according to how ranges ATR. But before we go farther, I think we need a little escape and discuss Average True Range (ATR).
Velez Vaylder ATR presented in his book «New concepts in technical trading systems» in 1978. Average True Range measures the volatility of market-based instruments, but not an indication of price direction or duration, simply the degree of price movement or volatility.
Vaylder defined the true range (TR) as the highest of the following values:
1. Current maximum minus minimum current;
2. Absolute value of: the current maximum negative previous closing;
3. Absolute value of: the current minimum, minus the previous closing.
If the current range of the maximum / minimum is large, there is a chance that it will be used as a real band. If the current range of the maximum / minimum is small, it is likely that will be one of the other two methods to calculate the true range. The latter two options are usually arose when the previous closing higher than the current maximum or the previous closing lower than the current minimum. To guarantee the positive numbers are absolute values of difference.
Average True Range is a rolling average of the True Range over a period of time. For example, the most popular 10-day ATR is the average of the True Range for the past 10 days.
Originally built their Keltner Channels with a simple 10-day moving average ATR. He then subtract or add this rolling average for the 10-day moving average price. Most graphics programs now uses the version popular Linda Raška, which uses the exponential Moving Average prices and building canals, using ATR multiplied at EMA instead of the ATR. Here's the formula:
Where:
x = length (days) EMA
m = multiplier
y = length (days) to calculate the ATR
Most often, the length of EMA and ATR are set the same, but this should not be so. However, some software packages do not give you the opportunity to change the length of ATR, but only the length of EMA and the multiplier. Linda Raška uses 20 EMA and the multiplier is 2.5, so I will continue to use those same values.
The initial interpretation for envelopes, bands or channels of touch or a little crossing the upper or lower channel, where the price becomes perekuplennoy or resell, and a high probability of its spread. Tech Keltnera, however, was based on the opposite interpretation - closing above the upper band or below the lower band is an indication of strong motion and must be perceived as a signal breakthrough, ie, break the upper channel is a signal to buy, and break the lower channel signal to sell.
However, if you decide to use Channels Keltnera, you can not use them in isolation. You must use other indicators to confirm the information provided by.
Let's look at the example of Channel Keltnera using conventional theory of the envelope (break above gives the signal of sale, a break below the signal of purchase). I added MACD and go a long way if the price closes below Canal Keltnera, but only after the crossing of MACD byche make up for confirmation. I'll go in the short side, when the price closes above the Canal Keltnera, but only after the crossing of MACD do Medvezhye down.
Below is a schedule of «Russell Midcap Value iShare» (IWS). At this time interval would have been open only a short position because the price never closed below Canal Keltnera.
The blue rectangles in the chart above shows, when the IWS closed above Canal Keltnera. Using only the Channel Keltnera for buying and selling, it would be effective before the closing date of 29 December 2003. Once added MACD, while the input signals have emerged late, we would not open a short position on 29 December 2003. or in any other closed above the channel (and, as you can see, there were quite a lot).
Next, a variant channels Keltnera with Stochastics. Although I'm not a big supporter of Stochastics, but they seem to work slightly better than the MACD, at least until you add the intersection of the lower 80 to confirm.
The red arrows show where you have to use the intersection of lines Stohostika. Purple arrows show where you have to use the intersection of Stochastics 80.
In this example, I first assessed the opening of short positions after closing above the Canal Keltnera and Stochastics bear crossing lines, marked with red arrows. However, after the rally on 29 December 2003., Stochastics ago Medvezhye crossing at least three times, giving false signals to sell. Then I evaluated the addition of another filter, which is required to not only make Stochastics Medvezhye crossing, but also crossed the 80 level. This eliminated false alarms after the rally on 29 December 2003. But in this case, we, like the MACD, receive signals too late (Purple arrows).
The next combination which I saw was a combination of Channels Keltnera with RSI (14). Here, it seems, the efficiency is much better. Criteria: The price closed above the Canal Keltnera and RSI (14) crosses the 70 level down. You would be a wrong signal to the sale of 31 December 2003. But the combination of the intersection of RSI (14) level 70 down to the closing price above the Canal Keltnera seems to be captured almost every short-term peak.
Open short positions only when the price closes above the Canal Keltnera and RSI (14) crosses level 70 from top to bottom.
You can change the values of indicators, based on their own preferences, and look how well they work, but the main point I want to emphasize is that no matter how good may be an indicator, it can not be used in isolation.
Channels Keltnera designed to determine the upper and lower limits of what can be considered as «normal» fluctuating prices. And the reason why they are so like me, is that these limits vary according to the volatility of prices and can be used very effectively as perekuplennosti levels and pereprodannosti, where you can take commercial decisions.
Remember: Plan your trade and deal in accordance with its plan.
There are three types of bands moving average - envelopes moving averages, bands and Bollindzhera Channels Keltnera .. All three are composed of three lines - the average moving average and two external lines or bands. (for more details, see the previous issue). The theory of envelopes or bands based on the fact that price has the greatest chance of movement within the borders of the external lines. Prices outside the bands are regarded as extreme situations and, therefore, provide an opportunity for trade. The main differences among the types of envelopes are in the computation of the bands or envelopes, the interval between the lines or the width of the bands and how they are interpreted.
Channels Keltnera, the name given on behalf of author Chester Keltnera their technique, which he called Rule 10-day moving average in his book 1960. «How to make money in commodity markets». This price envelopes or bands, which are placed above and below the exponential moving average multiplied by its value on the value of the average True Range (ATR). That is why, I find these channels is so intriguing: they vary according to how ranges ATR. But before we go farther, I think we need a little escape and discuss Average True Range (ATR).
Velez Vaylder ATR presented in his book «New concepts in technical trading systems» in 1978. Average True Range measures the volatility of market-based instruments, but not an indication of price direction or duration, simply the degree of price movement or volatility.
Vaylder defined the true range (TR) as the highest of the following values:
1. Current maximum minus minimum current;
2. Absolute value of: the current maximum negative previous closing;
3. Absolute value of: the current minimum, minus the previous closing.
If the current range of the maximum / minimum is large, there is a chance that it will be used as a real band. If the current range of the maximum / minimum is small, it is likely that will be one of the other two methods to calculate the true range. The latter two options are usually arose when the previous closing higher than the current maximum or the previous closing lower than the current minimum. To guarantee the positive numbers are absolute values of difference.
Average True Range is a rolling average of the True Range over a period of time. For example, the most popular 10-day ATR is the average of the True Range for the past 10 days.
Originally built their Keltner Channels with a simple 10-day moving average ATR. He then subtract or add this rolling average for the 10-day moving average price. Most graphics programs now uses the version popular Linda Raška, which uses the exponential Moving Average prices and building canals, using ATR multiplied at EMA instead of the ATR. Here's the formula:
Upper Canal Keltnera = EMA (closure, x) + (m * ATR (y))
Lower Canal Keltnera = EMA (closure, x) - (m * ATR (y))
Where:
x = length (days) EMA
m = multiplier
y = length (days) to calculate the ATR
Most often, the length of EMA and ATR are set the same, but this should not be so. However, some software packages do not give you the opportunity to change the length of ATR, but only the length of EMA and the multiplier. Linda Raška uses 20 EMA and the multiplier is 2.5, so I will continue to use those same values.
The initial interpretation for envelopes, bands or channels of touch or a little crossing the upper or lower channel, where the price becomes perekuplennoy or resell, and a high probability of its spread. Tech Keltnera, however, was based on the opposite interpretation - closing above the upper band or below the lower band is an indication of strong motion and must be perceived as a signal breakthrough, ie, break the upper channel is a signal to buy, and break the lower channel signal to sell.
However, if you decide to use Channels Keltnera, you can not use them in isolation. You must use other indicators to confirm the information provided by.
Let's look at the example of Channel Keltnera using conventional theory of the envelope (break above gives the signal of sale, a break below the signal of purchase). I added MACD and go a long way if the price closes below Canal Keltnera, but only after the crossing of MACD byche make up for confirmation. I'll go in the short side, when the price closes above the Canal Keltnera, but only after the crossing of MACD do Medvezhye down.
Below is a schedule of «Russell Midcap Value iShare» (IWS). At this time interval would have been open only a short position because the price never closed below Canal Keltnera.The blue rectangles in the chart above shows, when the IWS closed above Canal Keltnera. Using only the Channel Keltnera for buying and selling, it would be effective before the closing date of 29 December 2003. Once added MACD, while the input signals have emerged late, we would not open a short position on 29 December 2003. or in any other closed above the channel (and, as you can see, there were quite a lot).
Next, a variant channels Keltnera with Stochastics. Although I'm not a big supporter of Stochastics, but they seem to work slightly better than the MACD, at least until you add the intersection of the lower 80 to confirm.
The red arrows show where you have to use the intersection of lines Stohostika. Purple arrows show where you have to use the intersection of Stochastics 80.In this example, I first assessed the opening of short positions after closing above the Canal Keltnera and Stochastics bear crossing lines, marked with red arrows. However, after the rally on 29 December 2003., Stochastics ago Medvezhye crossing at least three times, giving false signals to sell. Then I evaluated the addition of another filter, which is required to not only make Stochastics Medvezhye crossing, but also crossed the 80 level. This eliminated false alarms after the rally on 29 December 2003. But in this case, we, like the MACD, receive signals too late (Purple arrows).
The next combination which I saw was a combination of Channels Keltnera with RSI (14). Here, it seems, the efficiency is much better. Criteria: The price closed above the Canal Keltnera and RSI (14) crosses the 70 level down. You would be a wrong signal to the sale of 31 December 2003. But the combination of the intersection of RSI (14) level 70 down to the closing price above the Canal Keltnera seems to be captured almost every short-term peak.
Open short positions only when the price closes above the Canal Keltnera and RSI (14) crosses level 70 from top to bottom.You can change the values of indicators, based on their own preferences, and look how well they work, but the main point I want to emphasize is that no matter how good may be an indicator, it can not be used in isolation.
Channels Keltnera designed to determine the upper and lower limits of what can be considered as «normal» fluctuating prices. And the reason why they are so like me, is that these limits vary according to the volatility of prices and can be used very effectively as perekuplennosti levels and pereprodannosti, where you can take commercial decisions.
Remember: Plan your trade and deal in accordance with its plan.
Jane Fox
www.screamingquote.com
www.screamingquote.com
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