identifying high probability setups using average true ...keltner channel - developed by chester w....

Identifying High Probability Identifying High Probability Setups Using Average True Setups Using Average True

Range Support and Range Support and ResistanceResistance

By Dan SteinbergBy Dan Steinberg

BioBio Professional Experience:Professional Experience:

2000 to2000 to Present Present –– Private investor/trader. Trading Mentor 2008Private investor/trader. Trading Mentor 2008--Present.Present.19921992--2000 2000 –– Gill and Company, Trading System Developer and Gill and Company, Trading System Developer and Portfolio Manager.Portfolio Manager.19821982--1992 1992 –– Market MakerMarket Maker-- Stock Options (Sole Proprietor), Stock Options (Sole Proprietor), Pacific Stock ExchangePacific Stock Exchange19801980--1982 1982 –– Bechtel Corporation, Nuclear EngineerBechtel Corporation, Nuclear Engineer

Education:Education:1979 University of Colorado, BS in Mechanical Engineering1979 University of Colorado, BS in Mechanical EngineeringPersonal:Personal:Married 32 years, 2 children, 56 years oldMarried 32 years, 2 children, 56 years old

Other:Other:Proficient in Spanish, Private Pilot License, Certified SCUBA OpProficient in Spanish, Private Pilot License, Certified SCUBA Open en WaterWater

True Range True Range The The true rangetrue range is theis the largestlargest of the:of the:

Most recent period's high minus the most recent period's low Most recent period's high minus the most recent period's low Absolute value of the most recent period's high minus the previoAbsolute value of the most recent period's high minus the previous close us close Absolute value of the most recent periodAbsolute value of the most recent period’’s low minus the previous close s low minus the previous close

Average True Range (ATR)Average True Range (ATR)

A measure of volatility introduced by A measure of volatility introduced by Welles Wilder in his book: New Concepts Welles Wilder in his book: New Concepts in Technical Trading Systems. in Technical Trading Systems.

Wilder originally developed the ATR for Wilder originally developed the ATR for commodities but the indicator can also be commodities but the indicator can also be used for stocks and indexes. Simply put, a used for stocks and indexes. Simply put, a stock experiencing a high level of volatility stock experiencing a high level of volatility will have a higher ATR, and a low volatility will have a higher ATR, and a low volatility stock will have a lower ATR. stock will have a lower ATR.

Using the ATR Using the ATR

Stock/Option Selection Stock/Option Selection Pair Trading Pair Trading Volatility Breakout SystemsVolatility Breakout Systems KeltnerKeltner ChannelsChannels ATR StopsATR Stops ATR Support and ResistanceATR Support and Resistance

KeltnerKeltner ChannelsChannels

KeltnerKeltner ChannelChannel -- developed by Chester developed by Chester W. W. KeltnerKeltner in 1960. The indicator is in 1960. The indicator is somewhat similar to the Bollinger Bands somewhat similar to the Bollinger Bands and Envelopes. It uses three plot lines: and Envelopes. It uses three plot lines: the middle line is the 10the middle line is the 10--day simple day simple moving average applied to the typical moving average applied to the typical price ((high + low + close) / 3), the upper price ((high + low + close) / 3), the upper and the lower bands are produced by and the lower bands are produced by adding and subtracting the ATR from the adding and subtracting the ATR from the middle line. middle line.

KeltnerKeltner vsvs BollingerBollinger

KeltnerKeltner vsvs BollingerBollinger

Modified ATR Modified ATR Published by Published by SylvianSylvian VervoortVervoort,,Stocks & Commodities V. 27:6Stocks & Commodities V. 27:6

Can be used as a Trailing StopCan be used as a Trailing Stop Can be used as Can be used as

Support/ResistanceSupport/Resistance Can be used Long/Short TriggerCan be used Long/Short Trigger

Mod ATR CalculationMod ATR Calculation

ATR SupportATR Support

ATR ResistanceATR Resistance

High Probability ATR SetupsHigh Probability ATR Setups

ATR with Momentum ComboATR with Momentum Combo ATR with 50day MA SetupATR with 50day MA Setup ATR with Pivot pointsATR with Pivot points Long/Short TriggerLong/Short Trigger

ATR with Momentum CombinationATR with Momentum Combination

ATR with Momentum CombinationATR with Momentum Combination

ATR with Momentum CombinationATR with Momentum Combination

ATR with 50day MA SetupATR with 50day MA Setup

ATR with 50day MA SetupATR with 50day MA Setup

ATR with 50 MA Setup IntradayATR with 50 MA Setup Intraday

ATR with 50 MA/BB SetupATR with 50 MA/BB Setup

Pivot PointsPivot Points

ATR with Pivot PointsATR with Pivot Points

ATR with Pivot PointsATR with Pivot Points

ATR with Pivot PointsATR with Pivot Points

Trend Quantification for Long/Short Trend Quantification for Long/Short TriggerTrigger

Wave OverlapWave OverlapMoving Average TransitionMoving Average TransitionMaximum Adverse ExcursionMaximum Adverse Excursion

Wave OverlapWave Overlap

MOVING AVE TRANSITIONMOVING AVE TRANSITION

Maximum Adverse ExcursionMaximum Adverse Excursion

Long/Short TriggerLong/Short Trigger

Short Only ModelShort Only Model

Market Condition AnalysisMarket Condition Analysis

Price Pattern Scans and FiltersPrice Pattern Scans and Filters

Trade Setup AnalysisTrade Setup Analysis

Price Target and Stop Loss EvaluationPrice Target and Stop Loss Evaluation

Position Entered into Monitoring System with Price Alert Position Entered into Monitoring System with Price Alert

Position Exit Position Exit –– Price Target or Stop LossPrice Target or Stop Loss

Trading Plan Flow ChartTrading Plan Flow Chart

ATR with 1 minute ESUATR with 1 minute ESU

Current Setups: TAN Current Setups: TAN vsvs USOUSO

Current Setups: JPMCurrent Setups: JPM