Keltner Channels

A volatility-based technical analysis indicator displaying a moving average line in the center of the channel, along with channel lines above and below the moving average line. Keltner Channel indicator is comparable to Bollinger Bands, which set their bands using the standard deviation. The Average True Range (ATR) is used by Keltner Channels to determine channel distance instead of the standard deviation. Usually, two Average True Range values are established above and below the 20-day EMA for the channels. The ATR determines channel width, while the exponential moving average determines direction. With the use of channel breakouts and channel direction, Keltner Channels, a trend-following indicator, can be utilized to spot reversals and trend directions. When the trend is flat, channels can also be utilized to spot overbought and oversold levels.