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    G5-T2 How To Use Keltner Channels

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    Keltner Channels are a volatility indicator similar to Bollinger Bands but calculated using the Average True Range (ATR) rather than standard deviations. The middle line is an Exponential Moving Average (EMA) and the upper and lower lines are set at a multiple of the ATR above and below the EMA. Breakouts from the upper or lower lines can signal a continuation of the trend, while price action confined within the channel provides clues about periods of overbought/oversold conditions and potential trend changes.

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    G5-T2 How To Use Keltner Channels

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    390 views6 pages
    Keltner Channels are a volatility indicator similar to Bollinger Bands but calculated using the Average True Range (ATR) rather than standard deviations. The middle line is an Exponential Moving Average (EMA) and the upper and lower lines are set at a multiple of the ATR above and below the EMA. Breakouts from the upper or lower lines can signal a continuation of the trend, while price action confined within the channel provides clues about periods of overbought/oversold conditions and potential trend changes.

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    G5-T2 How to Use Keltner Channels

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    Keltner Channels are a volatility indicator similar to Bollinger Bands but calculated using the Average True Range (ATR) rather than standard deviations. The middle line is an Exponential Moving Average (EMA) and the upper and lower lines are set at a multiple of the ATR above and below the EMA. Breakouts from the upper or lower lines can signal a continuation of the trend, while price action confined within the channel provides clues about periods of overbought/oversold conditions and potential trend changes.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    390 views6 pages

    G5-T2 How To Use Keltner Channels

    Uploaded by

    The Shit
    Keltner Channels are a volatility indicator similar to Bollinger Bands but calculated using the Average True Range (ATR) rather than standard deviations. The middle line is an Exponential Moving Average (EMA) and the upper and lower lines are set at a multiple of the ATR above and below the EMA. Breakouts from the upper or lower lines can signal a continuation of the trend, while price action confined within the channel provides clues about periods of overbought/oversold conditions and potential trend changes.

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    How to Use Keltner Channels

    Keltner Channels is a volatility indicator introduced by a grain trader named Chester


    Keltner in his 1960 book, How To Make Money in Commodities.

    A revised version was later developed by Linda Raschke in the 1980s.

    Linda’s version of the Keltner Channel, which is more widely used, is quite similar
    to Bollinger Bands in that it also consists of three lines.

    However, the middle line in a Keltner Channel is an Exponential Moving


    Average (EMA) and the two outer lines are based on the Average True Range (ATR)
    rather than on standard deviations (SD).
    Because the channel is derived from the ATR, which is a volatility indicator itself,
    the Keltner Channel also contracts and expands with volatility but is not as volatile as
    the Bollinger Bands.

    Keltner Channels serve as a guide for setting trade entries and exits.

    The Keltner Channel help identify overbought and oversold levels relative to a
    moving average, especially when the trend is flat.

    It can also provide clues for new trends.

    Think of the channel like an ascending or descending channel, except it automatically


    adjust to recent volatility and isn’t made up of straight lines.

    1
    If you’ve read our lesson on Bollinger Bands, you’re probably guessing that Keltner
    Channels are basically cut from the same cloth. Well, almost.

    What sets these two apart are the underlying indicators and calculations that we could
    go on and on about… but might lull you to sleep.

    Let’s just say that these formulas yield differences in price sensitivity and the
    smoothness of the indicators.

    How to Trade Forex Using Keltner Channels


    Keltner Channels show the area where a currency pair normally hangs out.

    The channel top typically holds as dynamic resistance while the channel bottom
    serves as a dynamic support.

    2
    How to Use Keltner Channels as Dynamic Support and
    Resistance Levels

    The most commonly used settings are 2 x ATR (10) for the upper and lower lines
    and EMA (20), which is the middle line.

    This middle line is pretty significant since it tends to act as a pullback level during
    ongoing trends.

    In an UPTREND, the price action tends to be confined in the UPPER HALF of the
    channel, which is between the middle line as support and the top line as resistance.

    In a DOWNTREND, price action usually hangs around the BOTTOM HALF of the
    channel, finding resistance at the middle line and support at the bottom line.

    3
    In a RANGING MARKET, price usually swings back and forth between the top and
    bottom lines.

    How to Trade Breakouts Using Keltner Channels

    Breakouts from the Keltner Channel act as strong hints where the price is running off
    to next.

    4
    If the candles start to break out above the TOP, then the move will usually continue to
    go UP.

    If the candles start to break below the BOTTOM, then the price will usually continue
    to go DOWN.

    5
    Keeping an eye out for these channel breakouts can help you catch a big move as early
    as possible.

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