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The K-Channel Trading Strategy Explained

March 10, 2021

by Jerry Robinson

One of the most popular trading strategies we have ever taught (based on member feedback) is something we call the K-Channel strategy. 

I think the reason this strategy has been so popular with our members is due to its relative simplicity. If you are looking for a straightforward rules-based swing or position trading strategy, the K-Channel trading strategy is really hard to beat.

I introduced this unique trading strategy on one of our live Tuesday coaching calls last year. Gold and Platinum members can watch the video here.

WATCH: The K-Channel Trading Strategy Explained

 

What is the “K-Channel?”The K-Channel is short for the Keltner channel, which a technical indicator named after Chester W. Keltner who described it in his 1960 book How To Make Money in Commodities. (Mr. Keltner was an old-school grain trader in the commodity pits in Chicago. While his book is pretty dated, it is still worth a read if you like learning different trading strategies.)

Put simply, the K-Channel is a moving average band indicator similar to the Bollinger Bands indicator but is volatility-based.

 

How the K-Channel Strategy Works

To identify new buy and sell signals with the K-Channel strategy, consider the three bands that are created by the K-Channel.

There is an upper band, a lower band, and a middle band, which is based on your selected moving average.

A “sell signal” occurs on a daily price close below its lower band.

A “buy signal” occurs on a daily price close above its upper band.

This strategy offers a simple visual way to identify new buy and sell signals. Of course, it is best to use this strategy with other confirming indicators.

 

Using the K-Channel Strategy with the Profit Trakker software

You can add the K-Channel to any chart in our Profit Trakker “classic” software. (It is not currently available in our Profit Trakker 2.0.)

Just scroll to the bottom of the Profit Trakker chart and hover over the “Select Your View” menu.

The last three views include the K-Channel indicator as a default setting.

When a stock or ETF is in a strong uptrend, traders can consider using the 30 K-Channel setting.

When an uptrend is strong, but not ferocious, we prefer to use the 50 K-Channel setting.

Here’s an example of how the 50-K Channel provided an excellent entry signal on First Majestic Silver (AG) last year.

While the 30 and 50 K-Channels are good for swing traders, position traders will benefit from a larger moving average. I personally like to use the 100 K-Channel and the 180 K-Channel for position trading purposes.

Have you tested out the K-Channel strategy yet? If not, I recommend that you check it out as it could be another great tool in your trading toolkit.

I’ll share some more about the K-Channel strategy in future emails. For now, watch this video about the strategy here. (Note: The discussion about the K-Channel strategy begins around the 28-minute mark.)

After watching this video, you can also try messing around with each of the different K-Channel settings in our Profit Trakker software here.

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