Mastering Trends with Keltner Channels & Stochastic Oscillator
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Keltner Channels and the Stochastic Oscillator form a powerful combination for identifying high-probability trade setups. Keltner Channels, which use Average True Range (ATR) to plot dynamic support and resistance levels, help traders gauge trend strength and potential breakouts. Meanwhile, the Stochastic Oscillator (typically set at 14,3,3) identifies overbought and oversold conditions, offering precise entry points. When price touches the upper Keltner band while Stochastic is overbought (above 80), it may signal a pullback—conversely, a dip to the lower band with Stochastic oversold (below 20) could indicate a reversal or bounce.
Timing Entries with Precision
One of the best ways to use these indicators is to wait for alignment. For example, in an uptrend, price should consistently ride the middle or upper Keltner Channel, while Stochastic dips below 20 and then crosses back above—confirming momentum is returning. This "Stochastic bounce" within a strong trend increases the likelihood of a continuation move. Similarly, in ranging markets, traders can fade extremes: selling when price hits the upper band with Stochastic overbought, or buying near the lower band when Stochastic is oversold. This method reduces false signals and keeps trades aligned with mean reversion principles.
Avoiding False Breakouts with Confirmation
A common pitfall in trading is chasing breakouts that quickly reverse. By combining Keltner Channels and Stochastic, traders can filter out weak signals. For instance, if price breaks above the upper Keltner band but Stochastic is already above 80 (overextended), the move may lack sustainability. Instead, waiting for a retest of the middle Keltner line with Stochastic resetting to neutral (near 50) provides a higher-confidence entry. This strategy works exceptionally well in forex, stocks, and crypto—where volatility can trigger fakeouts. By mastering this duo, traders gain an edge in both trending and sideways markets.
Money Management: It is important to follow up with this strict rule of investment: If you have $100 in your account, each open position should be $5 tops If you have $200 in your account, each open position should be $10 tops If you have $500 in your account, each open position should be $25 tops If you have $1,000 in your account, each open position should be $50 tops If you have $2,000 in your account, each open position should be $100 tops If you have $5,000 in your account, each open position should be $250 tops
We're currently in our 13th year helping traders become successful in the live markets so we know a thing or two about leveraging a small account into serious wins.
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Risk Disclaimer: Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information.
00:00Anyone can make a very good profit by using this strategy.
00:10This strategy can be very helpful for all traders, you just need to understand the strategy carefully, and watch every trade carefully.
00:18So first of all let us add the strategy settings and after that we will make some profit from it, so go to indicators settings, and add the Keltner channel. Now go to Keltner channel settings.
00:30And set to in multiplier settings. Then we will make some changes in the colors settings as well. So we will keep the color of the top line black, and make it 2px.
00:42Then we will set the color of the middle line white, and make it 2px as well. Then we will make the color of the bottom line black, and make it 2px as well, and the background color will look good only if it is white.
00:56And here the Keltner channel settings are complete, after this we will need one more indicator, and that is the stochastic oscillator, so we add it. Now it is necessary to change its settings as well, so here in the K period settings set 9.
01:11After this set 2 in D period, and also set 2 in smoothing period. And now after this we will make some changes in its color settings too, and remember that changing the color settings does not affect the strategy, it just makes the interface look nice.
01:27And here completes the settings of the stochastic oscillator, after this we will have to change the chart pattern, so today we will need the Heiken Ashi chart pattern. And set the candle timing to 30 seconds.
01:40After this set the expiry timing to 2 minutes. And now all our settings are complete.
01:49So here I got a nice chart.
01:53So there are 4 reasons to place an entry in the upward direction here. First of all, the blue and orange line in this stochastic oscillator have gone below this red line and have now turned upward again.
02:04This means that the market can move from oversold condition to overbought. And with this we saw a green candle forming here. So this means that the downtrend in the market has ended. And now the market is moving in an uptrend. And there are 2 more reasons for the market going up.
02:20As seen overall in the market, the uptrend is going on, and the market is going up taking support here. Support works well when the market is in an uptrend. So due to so many confirmations I have placed 4 entries here.
02:36And great, our first entry here has won, now lets look for the next entry.
02:56So here we have got a signal in the upside direction.
03:01So always keep in mind that, when the market comes near the lower line of Bollinger Bands, and starts forming green candles. Then understand that the downtrend in the market has ended, and now there are chances of the market moving in the upward direction.
03:16But at that time, the stochastic oscillator must also be in the oversold condition. If you get these 2 confirmations, then it is very good, and also do a little analysis of the direction of the market.
03:28Like here the market has been moving sideways for some time, and always remember one thing, if the market is moving in the uptrend direction, do not place the trade in the downward direction.
03:39When the market comes down to the previous support, then place the entry in the upward direction, and if the downtrend has started in the market, do not place the entry in the uptrend.
03:50When the market comes up to the previous resistance, place the entry in the downward direction.
03:55Always move with a market.
04:04And great, our second entry here won easily as well.
04:11It is very good that we have got a downtrend market here, because now you will be able to understand very well what I was understanding during the last trade, so the downtrend is going on here.
04:22It means that now we cannot place a trade in the upward direction, because we do not know for how long the market can go up.
04:29But we can definitely place a trade in the downward direction, because the market is going down this time also by taking resistance at the same place where the previous resistance is here.
04:39And the lines of the stochastic oscillator are also going from overbought condition to oversold condition.
04:46And if you analyze carefully, then in a downtrend the market will be seen going below the middle line mostly.
04:52But keep in mind that despite the downtrend in the market, sometimes the market reaches the upper line of the Keltner channel, and again starts moving in the downward direction.
05:03So in such a condition, you may have to use the Martingale step to recover the loss.
05:11So after placing the entry here, the price went above the entry point for some time.
05:16But there were a few last seconds left, at that time the downtrend started again in the market.
05:22And both our entries won.
05:26So here the chart is a little different.
05:29Like here the market has broken the previous resistance.
05:32And after moving up for some time in the market, now red candles have started forming, this means that the market is unable to go up now.
05:40And the stochastic oscillator has also been moving in overbought condition for a long time.
05:45So it seems that now the market will go down, so there is a little confusion here.
05:50Because the market has broken this resistance, then maybe the market can now move to this main resistance, and the indicators tell us that the market is weak and going up.
05:59There is a high possibility of the market going down from here.
06:02So we will go with the indicators here, but we will place only one entry here.
06:07So that if our entry loses then we can recover it in the next trade.
06:20And very good, here our entry has won.
06:30So you can see that the strategy is very amazing, and it works well too.
06:35You should practice it in the demo account because practice is very important, and in the real account also you should start with a very small amount, so that you get the idea.
06:45So if you like this strategy then you can like the video.
