Keltner Bands Technical Analysis & Keltner Bands Signals

Developed by Chester Keltner. Illustrated in his book 'How to Make Money in Commodities'

Keltner Channels are based on ATR technical indicator, the bands use ATR values to draw the band lines.

These Bands form Channels that help to spot the trends using this volatility channel.

Keltner Channels

Construction

Keltner Channels are similar to Bollinger Band except for the fact that Bollinger Band use standard deviation method to determine market volatility & to draw the bands.

For the keltner bands instead of using the standard deviation, the average true range ATR measure of the volatility is used.

This indicator is an n number of periods exponential Moving Average of the closing price. These bands are developed by

Adding (for the upper line) and

Subtracting (for the lower line)

An (n-period simple moving average of an n-period ATR) * an ATR multiplier.

Technical Analysis and How to Generate Trading Signals

This indicator can be traded and transacted in much the same way as a Bollinger Bands

Continuation Signals

When price moves outside the bands then a continuation of current trend is implied. A buy signal is when the channels are moving upwards and sell signal is when the channels are heading and moving downwards

Continuation Buy Sell Signals

Reversal Signals - Double Tops and Double Bottoms

Tops & Bottoms made outside the bands followed by tops & bottoms made inside the Keltner channels show signal for reversals in the trend.

Reversal Signals

Ranging Markets

In ranging markets a move that originates and starts from one Keltner band tends to go all the way to reach the other band.

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