How They’re Built

Bollinger Bands plot a moving average (usually 20‑period simple) with an upper and lower band set at a chosen number of standard deviations (commonly 2). Because standard deviation responds sharply to price spikes, BBs widen quickly during big moves and tighten when markets calm.

Reading the Bands

• Band Touches: Price touching the upper band suggests short‑term overextension; touching the lower band suggests the same to the downside.
• Band Squeeze: When the distance between upper and lower bands compresses, a volatility expansion often follows.
• Walk the Band: In strong trends, price can “ride” the upper or lower band; don’t fade every touch.

How They’re Built

Keltner Channels center on an exponential moving average (often 20‑EMA) with bands set a multiple of Average True Range (ATR). ATR smooths volatility more than standard deviation, so KC often respond less dramatically to single spikes and track sustained range expansion better.

Reading the Channels

• Channel Break: A decisive close outside the upper or lower KC can signal a trend day or continuation move.
• Channel Hug: Persistent closes near the outer band indicate momentum; pullbacks to the mid‑EMA can offer with‑trend entries.
• ATR Context: Rising ATR plus KC expansion supports breakout bias; falling ATR suggests mean‑reversion conditions.

• Bollinger Bands: 20‑SMA, 2 standard deviations is the classic. For faster markets, try 20‑SMA, 2.2–2.5 deviations on 1–5 minute charts to reduce whipsaws. For swing, 20–50 SMA with 2 deviations on 1‑hour to daily.
• Keltner Channels: 20‑EMA, 1.5–2 ATR. For strong trends or high‑beta altcoins, 1.75–2.25 ATR gives a clearer breakout signal.
• Timeframes: Scalpers favor 1–5m; intraday swing typically 15–60m; framework confirmation on 4H or daily helps avoid counter‑trend traps.

Rules

1. Confirm a range environment: flat 20‑SMA and falling ATR over the last 20 bars.
2. Enter long when price spikes below the lower BB and immediately closes back inside; enter short when price spikes above the upper BB and closes back inside.
3. Optional confirmation: RSI(14) divergence or a small bullish/bearish rejection wick.
4. Stop: 0.5–1.0 ATR beyond the signal candle’s extreme.
5. Targets: middle band first; opposite band second. Consider scaling 50/50.

Example

On a 15‑minute BTCUSDT chart, price wicks below the lower BB on declining ATR, then closes back inside with a hammer candle. Enter on the next bar’s break of the hammer high, stop below the wick low, take profit at the mid‑band, and trail the remainder towards the upper band.

Rules

1. Look for rising ATR and KC expansion over the last 20 bars.
2. Wait for a strong close above the upper KC (long) or below the lower KC (short).
3. Enter on the first pullback to near the mid‑EMA or the inside of the channel, ideally on lighter volume.
4. Stop: 1.0–1.5 ATR below the pullback low (long) or above the pullback high (short).
5. Targets: prior swing extension equal to 1x the initial expansion leg; trail with a chandelier stop (ATR‑based) or below/above the mid‑EMA.

Example

ETHUSDT on the 5‑minute breaks and closes above the upper KC after a consolidation. ATR rises, channels widen. You wait for a two‑bar pullback to the 20‑EMA, enter on a bullish engulfing candle, place the stop 1.2 ATR below the pullback low, scale at 1R, and trail until a close back inside the channel.

Rules

1. Identify a squeeze: BB width dips inside the KC for at least 5–10 bars.
2. Define bias: use a higher‑timeframe trend filter (e.g., 1‑hour 50‑EMA slope). Only take breakout in the direction of the higher‑timeframe trend.
3. Trigger: first strong close outside the KC with rising volume or a momentum surge.
4. Entry: break of the trigger bar; conservative entries wait for a shallow retest.
5. Stop: just inside the opposite KC band or 1–1.5 ATR from entry.
6. Targets: 1.5–2.5R, or trail with a parabolic stop or KC midline.

Chart Walk‑Through

Imagine SOLUSDT on the 15‑minute: BBs tuck neatly inside the KCs for 12 bars while the 1‑hour 50‑EMA slopes upward. A wide green candle closes beyond the upper KC as volume expands. You enter on the next bar’s break, set a 1.2 ATR stop, take partial profit at 1.5R, and trail the rest with the KC midline until a close back inside.

Position Size (units) = (Account Risk % × Equity) ÷ (ATR multiple × Tick Value)

Example: If you risk 0.5% on a $20,000 account ($100 risk) and your stop is 1.2 ATR = $50 on BTC, the position size is 2 contracts (if 1 contract moves $50 per ATR). Adjust for your instrument’s tick value and lot size.

Pre‑Market (or Pre‑Session) Checklist

• Mark key levels: prior day high/low, session open, VWAP, and obvious swing pivots.
• Assess regime: rising vs. falling ATR; trend on the 1‑hour (50‑EMA slope).
• Pick tools: BB for ranges, KC for trend continuation, or hybrid BB‑KC squeeze watchlist.
• Define risk per trade and daily max loss (e.g., 0.5% per trade, 2R daily cap).

Intraday Playbook

1. Start on the 15m to gauge context; drill down to 3–5m for entries.
2. If BB squeeze forms, wait for a confirmed breakout bar and alignment with higher‑timeframe bias.
3. For KC trend days, buy/sell the first pullback to the mid‑EMA with ATR rising.
4. Scale at 1–1.5R; trail with KC midline or chandelier stop.
5. Stop trading after two full losses or when daily target is hit—protect focus.

End‑of‑Day Review

• Tag each trade: BB mean‑reversion, KC breakout, BB‑KC squeeze.
• Record R multiple, slippage, adherence to rules, and emotional notes.
• Screenshot charts with indicators visible for pattern recognition.

Simple Pseudocode for the BB‑KC Squeeze

if BB_Width < KC_Width for N bars and HTF_EMA slope > 0 then
    wait for close > upper_KC
    enter long on next bar high break
    stop = entry - 1.2 * ATR
    take_profit1 = entry + 1.5R
    trail_stop = KC_midline or chandelier
else if BB_Width < KC_Width and HTF_EMA slope < 0 then
    mirror for short

• Fading strong trends with BB: A tag isn’t an automatic reversal. Require a close back inside and ideally momentum divergence.
• Chasing KC breaks without context: If ATR isn’t rising or the higher‑timeframe trend is flat, breakouts fail more often.
• Static stops on dynamic volatility: Use ATR‑based buffers; crypto’s pace can invalidate fixed‑pip logic.
• No scale‑out plan: Runners are rare without patience; partials plus a trailing stop balance psychology and profit potential.
• Over‑optimizing parameters: Keep settings simple and robust across assets and timeframes.

Plan Outline

1. Universe: BTC, ETH, and 3 liquid altcoins (top volume).
2. Indicators: BB(20, 2.2), KC(20‑EMA, 1.8 ATR), ATR(14), 50‑EMA on 1h for bias.
3. Setups: BB mean‑reversion, KC breakout pullback, BB‑KC squeeze.
4. Risk: 0.5% per trade, max 2R daily drawdown.
5. Entries: Close confirmation; pullback limit orders preferred.
6. Exits: Partial at 1–1.5R; trail using KC midline or chandelier stop.
7. Review: End of day, journal screenshots and notes on rule adherence.

Do I need both indicators?

Not strictly. If you prefer breakouts and trend following, KC alone can work. If you love ranges and fades, BB can be enough. The hybrid squeeze offers added timing precision when volatility compresses.

What timeframes work best?

For day trading, 3–15m entries with 1h trend filter. For swing, 1h entries with 4h/daily filter. Always sync signals with the higher‑timeframe direction when possible.

How do fees affect strategy?

High turnover strategies demand tight spreads and low fees. Prioritize liquid pairs and consider maker rebates where available. For Canadians, comparing CAD pairs on local exchanges to USD stablecoin pairs on global venues can reduce friction.