Keltner Channel
February 28, 2009
Definition:
Keltner Channel is often used as an alternative to Bollinger Bands, and is based on the Average True Range.
The Keltner Channel has an upper band, lower band and center band. The center band is simply a moving average. Swingtracker Charts provides the option of using a simple moving average (default) or exponential moving average.
The upper and lower bands take a calculation of the average true range over half the periods used for the moving average, double the value and add or subtract for the upper and lower bands.
Interpretation:
Like most bands or envelopes, prices are expected to remain within the upper and lower bands, and if they trade above or below the bands can represent a trading opportunity.
Many traders do not use these as absolute buy or sell signals, but use them in conjunction with other indicators to make more informed decisions on entering or exiting a position.
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