TRADING RANGING MARKETS WITH KELTNER BANDS

Trading Ranging Markets with Keltner Channel
It is said that the number one account killer in the market is a ranging market. Consolidations are very difficult to trade. However, you can take advantage of the difference in the way Keltner channel system can be used in combination with other technical indicators.
The price won’t really touch the bands when it bounces between the upper and lower envelopes. When we’re in a ranging market, you’ll often see that the price will fail to touch the bands. The majority of the time the price will hug the middle band.
This anomaly in price behavior requires us to use a secondary technical indicator to find profitable trades.
Since the Forex market spends most of its time in consolidation, around 70% of the time, it’s mandatory to have a range trading strategy to survive in this market.
For range trading we like to use Keltner Channel bands in combination with a 2-period RSI indicator. We tweaked the RSI settings so we can better identify tops and bottoms within a trading range.
Note #3: For this Keltner trading strategy we use the 90-10 levels of overbought and oversold readings.
Here are some rules that can guide you to make the best trading decisions:
Keltner envelopes need to turn flat, to signal a consolidation.
Price needs to break below the middle band.
A buy order is triggered once the 2-period RSI goes below 10 indicating oversold conditions.
The protective stop loss can be hidden on the other side of the Keltner band.
For the long side take profit when the RSI reaches the 90 level.