The introductory trading system will be based on two indicators: the Keltner channel and the Bollinger Bands. Although these are two similar indicators, we will take advantage of their differences. This is a Reversal Trading System so it works best in ranged markets where we can use indicators like Bollinger Bands to identify extreme points (overbought/overbought). sold) with more reliable results. Conversely, we will have difficulty predicting extremes in trending markets, so their signals are less reliable.

Since this system uses two simple and readily available indicators, it can be used in any trading platform.

Next, we will learn the rules of this trading method together (Note: It is recommended to test this system on a demo account before using it to trade with real money for a better understanding. more about the system):

Settings and indicators used in this trading system

Recommended Markets: This trading system can be used in most markets, including trading, precious metals and indices. We should test trading on all the markets we are interested in.

Recommended Time Frame: It is recommended to use this trading system in the 30 minute timeframe (M30) and the larger intraday timeframes (H1, H4 and D1).

Recommended Trading Sessions: This strategy produces the best results during the European and American sessions, as during these sessions the market usually moves the most.

Indicators used in the system - This method uses only two technical indicators

  • Bollinger Bands with standard setup (20, 2).
  • Keltner channel period 10.

Trading rules

The trading rules of this system are quite simple, but they require watching the market and price action as it is based on the breakout and recovery of the price at extreme levels (overbought/oversold) created by Keltner channels and Bollinger Bands.

Buying rules

A long position is opened when the following conditions occur:
  • The asset price fell and the candle closed below the lower Bollinger Band and below the Keltner channel.
  • We will wait for the price to bounce, start rising and close above the lower Keltner channel line.
  • Finally, we open a long position at the opening price of the next candle.
Selling rules

Short positions are opened when the following conditions occur:
  • The asset's price rose and the candle closed above the upper Bollinger Bands and above the Keltner Channel.
  • We will wait for the price to bounce back, start to decline and close below the upper channel of the Keltner channel.
  • Then we open a short position at the opening price of the next candle.
Close position

1. Stop Loss - For this strategy, the recommended stop loss is as follows:
  • For a long position: The stop loss is placed below the nearest swing low.
  • For short positions: Stop loss is placed above the nearest swing high.
2. Take Profit Target - We can close the position when the price reaches the middle band of the Bollinger Bands or the middle band of the Keltner Channel.

Example of a trading system


The signals are shown by arrows pointing to the price bars.

For buy signals, we can observe how the price goes down and breaks through the lower band of the Keltner Channel and Bollinger Bands. When the price bounces and starts to rise, we open a long position when the price closes above the lower band of the Keltner Channel (Closing above the lower band of the Bollinger Band is also possible). Sell ​​signals are the same, but the whole house does the opposite.

As we can see in the illustrative example, the system generates the most reliable signals when the market moves within a range. When the price is in a strong trend, it is easier for the price to hit the stop-loss points, as it only makes short-term retracements (up or down), then back to the previous trend and easily. breakout of the extreme levels of the Keltner Channel and the Bollinger Bands.

Therefore, use this trading system when the market moves within specified price ranges and stop trading until stopped loss.