The Keltner Channels are two volatility-based lines placed above and below a moving average. While resembling the Bollinger Bands®, Keltner Channels use the Average True Range (ATR) as an offset measure between them and a moving average instead of standard deviation (used in Bollinger Bands®). By default, the distance between each channel and the moving average is equal to ATR multiplied by two.
Keltner Channels are commonly used as a trend following indicator: closing above the upper channel line is interpreted as a bullish signal, while closing below the lower channel line is considered a bearish signal. In the flat trend conditions, channel lines can be interpreted as the overbought and oversold levels; in these conditions, price action often forms peaks at the upper line and troughs at the lower line.
When applying Keltner Channels, consider using momentum indicators along with them in order to evaluate how strong the trend is.
|The displacement of the study, in bars. Positive values signify a backward displacement.
|The factor by which the ATR value is multiplied to calculate the distance.
|The number of bars used to calculate the average.
|The price used in calculations.
true range average type
|The type of moving average to be used in the calculation of the ATR: simple, exponential, weighted, Wilder's, or Hull.
|The average plot.
|The upper channel line.
|The lower channel line.
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.