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Directional Movement & Keltner Channel

by | Sep 27, 2020

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

When trading crypto assets, it is crucial to recognize market conditions. Crypto traders will use several technical analysis tools at the same time to better understand market conditions. This blog will discuss two technical indicators, the Directional Movement & Keltner Channel, which help crypto traders make better trading decisions in markets like BTC & ETH.

Directional Movement

The Directional Movement Index is a trading tool created by J. Welles Wilder, and it distinguishes in which course the crypto asset price is shifting. DMI accomplishes this by examining previous highs and lows, forming two lines, a positive directional movement line, and a negative directional movement line. An optional third line, termed directional movement, portrays the contrast between the positive and negative directional movement lines. DMI assists crypto traders in evaluating the pice course for a particular asset. Crossovers among the tracks are also sometimes utilized as trade flags to buy or sell a crypto asset. 

The DMI is mainly applied to improve prediction on asset trends and provide trade signals for crypto traders. Crossovers are the leading trade flags. A long trade is exercised when the positive line crosses above the negative line, and an uptrend could be started. A sell sign happens when the negative line goes below negative. A short trade is launched when the negative line falls below the positive line because a downtrend could be initiated. While the DMI may provide some right trading signals, it will also give some bad ones as a trend may not significantly evolve after entry.

Keltner Channel

Directional Movement & Keltner Channel
Directional Movement & Keltner Channel Indicator on HyperTrader

Keltner Channels are volatility-based envelopes placed over and beneath an EMA. Keltner Channels is comparable to Bollinger Bands, which utilizes the standard deviation to set the bands. The Keltner Channel indicator also uses a volatility-based trading indicator to enable traders to trade assets that reveal decent price action. Keltner Channels are beneficial because they can create a course. When a crypto asset is soaring, its value should typically touch or reach near the top band and even go past it. The value should also be over the lower band and usually linger over the middle band or hardly drop beneath it.

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