Volatility and trend strength

Keltner Channel

Keltner Channel is an EMA with bands set a multiple of ATR above and below. It is smoother than Bollinger Bands.

How to read it

  • A close outside the channel shows a strong move.
  • Inside the channel the price is in its normal range.
  • Bollinger Bands inside Keltner Channel = a volatility squeeze.

Settings

Default EMA 20, ATR multiplier 2.

Example rule to test

Breakout idea: a close above the upper Keltner band after a squeeze.

Common mistake

Fading every close outside the channel in a trend.

Try it free on iTradeChart

For learning only. Backtests use past data and do not guarantee future results. Not investment advice.