{"id":9586,"date":"2020-08-27T15:14:00","date_gmt":"2020-08-27T19:14:00","guid":{"rendered":"https:\/\/ibkrcampus.eu\/trading-lessons\/bands-and-channels-monitoring-extension-and-momentum\/"},"modified":"2024-01-22T17:41:48","modified_gmt":"2024-01-22T17:41:48","slug":"bands-and-channels-monitoring-extension-and-momentum","status":"publish","type":"trading-lessons","link":"https:\/\/www.interactivebrokers.eu\/campus\/trading-lessons\/bands-and-channels-monitoring-extension-and-momentum\/","title":{"rendered":"Bands and Channels: Monitoring Extension and Momentum"},"content":{"rendered":"<h3>Why Use Bands or Channels?<\/h3>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1966 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/01-why-candles.jpg\" alt=\"\" width=\"776\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 776px; aspect-ratio: 776\/540;\"><\/p>\n<h3>Markets In Relation to Moving Averages<\/h3>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1967 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/02-markets-relation-moving-averages.jpg\" alt=\"\" width=\"776\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 776px; aspect-ratio: 776\/540;\"><\/p>\n<h3>How Far is \u201cFar Away\u201d?<\/h3>\n<p>20 SMA w\/ 2.25 ATR Keltner Channels<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1968 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/03-how-far-candles.jpg\" alt=\"\" width=\"774\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 774px; aspect-ratio: 774\/540;\"><\/p>\n<h3>Why Bands or Channels?<\/h3>\n<p>Markets behave differently in equilibrium compared to when momentum is driving them.<\/p>\n<p>Looking at how close or how far a market is to a moving average is one way to measure momentum.<\/p>\n<p>Bands are a structured way to measure distance from a moving average.<\/p>\n<h3>Types of Bands<\/h3>\n<p>Moving Average Channels<\/p>\n<ul>\n<li>Offset from a central moving average by a percent of price<\/li>\n<\/ul>\n<p>Bollinger Bands<\/p>\n<ul>\n<li>Offset by a standard deviation (of price)<\/li>\n<\/ul>\n<p>Keltner Channels<\/p>\n<ul>\n<li>Offset by a multiple of Average True Range (ATR)<\/li>\n<\/ul>\n<h3>Keltner Channels<\/h3>\n<p>(20 per SMA, +\/- 2 ATRs)<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1969 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/04-celtner-channels.jpg\" alt=\"\" width=\"776\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 776px; aspect-ratio: 776\/540;\"><\/p>\n<h3>Bollinger Bands<\/h3>\n<p>(20 per SMA, +\/- 2 Std Devs)<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1970 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/05-bollinger-bands.jpg\" alt=\"\" width=\"774\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 774px; aspect-ratio: 774\/540;\"><\/p>\n<h3>Overbought \/ Oversold<\/h3>\n<p>This is an important concept in technical analysis\u2026<\/p>\n<p>But it\u2019s also a thorny concept!<\/p>\n<p>An overbought market:<\/p>\n<ul>\n<li>Is potentially over-extended to the upside (\u201ctoo strong\u201d)<\/li>\n<li>And maybe due for a selloff<\/li>\n<\/ul>\n<p>Oversold is the reverse.<\/p>\n<h3>Be Careful<\/h3>\n<p>Do not assume that something <i>will<\/i> or <i>must<\/i> happen.<\/p>\n<p>At best, any tool only gives us a tilt in probabilities.<\/p>\n<p>This is the definition of a trading edge.<\/p>\n<ul>\n<li>Overbought\/oversold markets can carry high risk:<\/li>\n<li>These points come in strong trends<\/li>\n<\/ul>\n<p>They can also come with extreme volatility<\/p>\n<p>Overbought markets can get more overbought and stay overbought longer than anyone might expect!<\/p>\n<h3>At What Point Was the DJIA Overbought?<\/h3>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1971 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/07-djia-overbought.jpg\" alt=\"\" width=\"776\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 776px; aspect-ratio: 776\/540;\"><\/p>\n<h3>Momentum<\/h3>\n<p>Several definitions:<\/p>\n<ul>\n<li>The difference between two closes (standard TA indicator)<\/li>\n<li>Acceleration of the change of prices (slope of an MA)<\/li>\n<li>The tendency for strong assets (relative to other assets) to become stronger<\/li>\n<\/ul>\n<p>The tendency of prices to continue to move in one direction<\/p>\n<p>Offsetting force is mean reversion<\/p>\n<h3>Using Bands to Measure Momentum<\/h3>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1967 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/02-markets-relation-moving-averages.jpg\" alt=\"\" width=\"776\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 776px; aspect-ratio: 776\/540;\"><\/p>\n<h3>Summary<\/h3>\n<p>Bands or channels are one way to measure distance from a moving average.<\/p>\n<p>Different ways to structure and use bands or channels<\/p>\n<p>Three important concepts:<\/p>\n<ul>\n<li>Overbought \/ oversold<\/li>\n<li>Momentum<\/li>\n<li>Mean reversion<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Bands and channels are one way to precisely define and to measure the distance that the market has moved from a moving average. In this lesson we\u2019re going to look at some of the different types of bands, options for setting them up, specific ways to use them to quantify overbought\/oversold conditions in markets, and then we\u2019re also going to talk about what bands can tell us about momentum.  We\u2019ll cover Bollinger Bands, Keltner channels, and Moving Average Channels.<\/p>\n","protected":false},"author":899,"featured_media":9596,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[433],"traders-academy":[100,103,105],"class_list":["post-9586","trading-lessons","type-trading-lessons","status-publish","has-post-thumbnail","contributors-categories-marketlife","traders-academy-beginner-trading","traders-academy-level","traders-academy-trading-lesson"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Archives | Traders&#039; Academy | IBKR Campus<\/title>\n<meta name=\"description\" content=\"Bands and channels are one way to precisely define and to 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