Bollinger Bands vs. Keltner Bands vs. Momentum Bands

Technical Analysis Comparison

Technical Analysis is a method of evaluating stocks, futures or forex pairs by analyzing the data generated by market activity, such as past prices and volume. Day traders do not attempt to measure what the intrinsic value of a stock may be, but instead use charts and other tools to identify patterns that can predict future price action. Many day traders attempt to categorize technical indicators.

For me, I like to use certain indicators to gauge overbought and oversold conditions.  I use another set of indicators the assess the strength of the markets move.  I also use a set of indicators to look at the volatility of the price action.  This leads us to today’s discussion of Envelope indicators.

Envelope indicators define the upper and the lower margins of the price range.  The band margins shifting is determined with the market volatility.  Some examples of envelope oscillators are:

1.  Bollinger Bands consist of a center line and two price channels (bands) above and below it.  The bands will expand and contract as the price action of an issue becomes volatile (expansion) or becomes bound into a tight trading pattern (contraction).
2. Keltner Bands are  upper and lower bands that adapt to changes in volatility by using the average true range.
3. Momentum Bands are a variation of Bollinger Bands devised by David Elliott.