Widely known for their ability to incorporate volatility and capture price action, Bollinger Bands have long been a favorite of forex traders. However, there are other technical options that traders in the 澳洲幸运5官方开奖结果体彩网:currency markets can apply to capture profitable opportunities in 澳洲幸运5官方开奖结果体彩网:swing action.

Lesser-known band indicators such as 澳洲幸运5官方开奖结果体彩网:Donchian channels, 澳洲幸运5官方开奖结果体彩网:Keltner channels, and 澳洲幸运5官方开奖结果体彩网:STARC bands are all used to isolate such opportunities. Also used in the futures and options markets, these 澳洲幸运5官方开奖结果体彩网:technical indicators have a lot to offer given the vast 澳洲幸运5官方开奖结果体彩网:liquidity and technical nature of the FX forum.

Differing in underlying calculations and interpretations, each study is unique because it highlights different components of the price action. Here we explain how Donchian , Keltner channels, and STARC bands work and how traders can use them to their advantage in the 澳洲幸运5官方开奖结果体彩网:FX market.

Donchian Channels

澳洲幸运5官方开奖结果体彩网:Donchian c𓂃hannels are price channel studies that are available on most charting packages and can be profitably applied by both novice and expert traders. Although the application was intended mostly for the 澳洲幸运5官方开奖结果体彩网:commodity futures market, th♉e🍌se channels can also be widely used in the FX market to capture short-term bursts or longer-term trends.

Created by Richard Donchian, considered to be the father of successful trend-following, the study contains the underlying currency fluctuations and aims to place profitable entries upon the start of a new trend through penetration of either the lower or upper band. Based on a 20-period 澳洲幸运5官方开奖结果体彩网:moving average (and thus sometimes referred to as a moving average indicator), the application additionally establishes bands that plot the highest high and lowest low. As a result, the follow🐲ing signals are produced:

• A buy, or long, signal is created when the price action breaks through and closes above the upper band.
• A sell or short, signal is created when the price action breaks through and closes below the lower band.

The theory behind the signals may seem a little confusing at first, as most traders assume that a break of the upper or lower boundary signals a reversal, but it is actually quite simple. If the current price action is able to surpass the range's high (provided enough momentum exists), then a new high will be established because an uptrend is ensuing. Conversely, if the price action can crash through the range's low, a new 澳洲幸运5官方开奖结果体彩网:downtrend may be in the works. Let's look at a prime example of how this the🧜ory works in 🐻the FX markets.

In Figure 1, we see the short, one-hour time-framed 澳洲幸运5官方开奖结果体🌳彩网:euro/U.S. dollar currency pair (EUR/USD) chart. We can see that, prior to December 8, the price action is contained in tight consolidation within the parameters of the bands. Then, at 2 a.m. on December 8, the price of the euro makes a run on the session and closes above the band at Point A. This is a signal for the trader to enter a 澳洲幸运5官方开奖结果体彩网:long position and liquidate 澳洲幸运5官方开奖结果体彩网:short positions in the market. If entered correctly, the trader will gain almost 100 pips in the short intraday burst.

Keltner Channels

Another great channel study that is used in multiple markets by all types of traders is the Keltner channel. The application was introduced by Chester W. Keltner (in his 1960 book How To Make Money In Commodities) and later modified by famed futures trader Linda B. Raschke. Raschke altered the application to take into account the 澳洲幸运5官方开奖结果体彩网:average true range (ATR) calculation over 10 periods. The ATR measures 澳洲幸运5官方开奖结果体彩网:volatility or how extensive the price moves are for a commodity or currency ovꦺer a set period.🔥

As a result, the volatility-based technical indicator bears many similarities to Bollinger Bands®. The difference between the two studies is that Keltner's channels represent volatility using the high and low prices, while Bollinger's studies rely on the 澳洲幸运5官方开奖结果体彩网:standard deviation. Nonetheless, the two studies share similar interpretations an🅺d tradable signals in the currency markets.

Like Bollinger Bands®, Keltner channel signals are produced when the price action breaks above or below the channel bands. Here, however, as the price action breaks above or below the top and bottom barriers, a continuation is favored over a retracemen🧔t back to the median or opposite barrier.

• If the price action breaks above the band, the trader should consider initiating long positions while liquidating short positions.
• If the price action breaks below the band, the trader should consider initiating short positions while exiting long or buy positions.

Let's dive further into the application by looking at the example below.

By applying the Keltner study to a daily charted British pound/Japanese yen 澳洲幸运5官方开奖结果体彩网:currency cross pair (GBP/JPY), we can see that the price action breaks above the upper barrier, signaling for the trader to initiate long positions. Placing effective entries, the FX trader will have the opportunity to effectively capture profitable swings higher and at the same time, exit efficiently, maximizing profits.

No o☂ther🐈 example is more visually stunning than the initial break above the upper barrier.

• The trader can initiate a trade above the close of the initial session burst above at Point A on July 17.
• After the initial entry is placed above the close of the session, the trader can capture nearly 300 pips before GBP/JPY retraces and retests support.
• Another position can be initiated at Point B, where momentum once again takes the position approximately 350 pips higher.

STARC Bands

Also similar to the Bollinger Band® technical indicator, STARC (or Stoller Average Range Channels) bands are calculated to incorporate market volatility. Developed by Manning Stoller in the 1980s, the bands will contract and expand depending on the fluctuations in the average true range component. The main difference between tꦦhe two interpretations is that STARC bands help to determine the higher probability trade rather than standard deviations c💎ontaining the price action. Simply put, the bands will allow the trader to consider higher or lower risk opportunities rather than a return to a median.

• Price action that rises to the upper band offers a lower risk sell opportunity and a high-risk buy situation.
• Price action that declines to the lower band offers a lower risk buy opportunity and a high-risk sell situation.

This is not to say that the price action won't go against the newly initiated position. However, STARC bands do act in the trader's favor by displaying the best opportunities. If this indicator is coupled with disciplined money management, the FX enthusiast will be able to profit by taking on lower-risk initiatives and minimizing losses. Let's take a look at an opportunity in the 澳洲幸运5官方开奖结果体彩网:New Zealand dollar/U.S. dollar 澳洲幸运5官方开奖结果体彩网:(NZD/USD) currency pair.

Looking at the New Zealand dollar/U.S. dollar 澳洲幸运5官方开奖结果体彩网:currency pair presented in Figure 3, we see that the price action has been mounting a bullish rise over the course of November, and the currency pair looks ripe for a retracement of sorts. Here, the trader can apply the STARC indicator as well as a price oscillator (澳洲幸运5官方开奖结果体彩网:Stochastic, in this case) to confirm the trade.

After overlaying the STARC bands, the trader can see a low-risk sell opportunity as we approach the upper band at Point A. Waiting for the second candle in the textbook 澳洲幸运5官方开奖结果体彩网:evening star formation to close, the individual can take a♑dvantage by placing an entry below the close of the session.

Confirming with the downside cross in the Stochastic oscillator, Point X, the trader will be able to profit almost 150 pips in the day's session as the currency plummets from 0.7150 to an even 0.7000. Notice that the price action touches the lower band at that point, signaling a low-risk buy opportunity or a potential reversal in the short-term trend.

Putting It All Together

Now that we've examined trading opportunities using channel-based technical indicators, it's time to take a detailed look at two more examples and to explain how to capture such profit windfalls.

Donchian Channel Opportunity

In Figure 4, we see a great short-term opportunity in the British pound/Swiss franc (GBP/CHF) currency cross pair. We'll 澳洲幸运5官方开奖结果体彩网:put the Donchian technical indicator to ꦚwork and go through the process step by step.

These are the steps to follow:

1. Apply the Donchian channel study on the price action. Once the indicator is applied, the opportunities should be clearly visible, as you are looking to isolate periods where the price action breaks above or below the study's bands.

2. Wait for the close of the session that is potentially above or below the band. A close is needed for the setup as the pending action could very well revert back within the band's parameters, ultimately nullifying the trade.

3. Place the entry at slightly above or below the close. Once momentum has taken over, the directio♏nal bias should push the price past the close.

4. Always use stop management. Once the entry has been executed, a 澳洲幸运5官方开奖结果体彩网:stop-loss order should always be 🐬considered since it can cap losses to a predetermined amount.

Applying the Donchian study༺ in Figure 4, we find that there have been several profitable opportunities iꦆn the short time span.

• Point A is a prime example: here, the session closes below the bottom channel, lending to a downside trend.
• As a result, the entry is placed at the low of the session after the close, at 2.2777.
• The stop-loss order will be placed slightly above the high of the session, at 2.2847.

Once you are in the market, you can either liquidate your short position on the first leg down or hold on to the sell. Ideally, the position would be held in retaining a legitimate 澳洲幸运5官方开奖结果体彩网:risk to reward ratio. However, in the event the position is🐭 closed, you may con𓃲sider a re-initiation at Point B. Ultimately, the trade will profit over 120 pips, justifying the high stop.

Keltner Channel Opportunity

It's not just Donchians that are used to capture profitable opportunities–Keltner applications can be used as well. Taking the step-by-step approach, let's define a Keltner opportunity:

1. Overlay the Keltner channel indicator onto the price action. As with 🧸the Donchian example, the opportunities should be cꦚlearly visible, as you are looking for penetration of the upper or lower bands.

2. Establish a session close of the candle that is the closest or within the channel's parameters.

3. Place the entry four to five points outside the high or low of the session's candle.

4. Money management is applied by placing a stop slightly below the session's low or above the session's high price.

Let's apply these steps to the 澳洲幸运5官方开奖结果体彩网:British pound/U.S. dollar example below.

In Figure 5, we see a very profitable opportunity in the 澳洲幸运5官方开奖🃏结果体彩网:British pound/U.S. dollar (GBP/USD) major currency pair on the daily time frame. Already testing the upper barrier twice in recent weeks, the trader can see a third attempt as the price action rises on July 27 at Point A. What needs to be obtained at this point is a definitive close above the barrier, constituting a break above anಞd sig🎶naling the initiation of a long position.

Once the chartist receives the clear break and closes above the barrier, the entry will be placed five points above the high of the closed session 🍌(entry). This willꦓ ensure that momentum is on the side of the trade and the advance will continue.

• The entry will be placed at precisely at 1.8671.
• The stop will be placed below the low price by one to two points, or in this case at 1.8535.
• The trade pays off as the price action moves higher in the following weeks with our profits maximized at the move's high of 1.9128.
• As a result, a profit of over 400 pips is realized in less than a month; the risk-reward is maximized at more than a 3:1 ratio.

The Bottom Line

Although Bollinger Bands are more widely known, Donchian channels, Keltner channels, and STARC bands have proved to offer comparably profitable opportunities. By diversifying your knowledge and experience in different band-based indicators, you'll be able to seek a multitude of other opportunities in the FX market. These lesser-known bands can add to the repertoire of both the novice and the seasoned trader.