Keltner Channel


The Kelter Channel, named after its creator Chester W. Keltner, is a technical indicator widely used in financial analysis to identify trends and potential reversals in stock prices. Consisting of a middle line typically representing a moving average, and upper and lower channel lines drawn at two times the Average True Range (ATR) above and below the middle line respectively, it serves as a tool for traders to assess market trends and volatility. Traders observe price movements relative to these lines, with breaches signaling potential overbought or oversold conditions, and thus, potential reversals in the price trend. By providing insights into market momentum and volatility, the Kelter Channel aids traders in making informed decisions about entry and exit points in the market.

Input Parameters:

  • Length: Number of periods used in the calculation.
  • MA Type: Select the moving average type like EMA or SMA.
  • ATR Length: Used to determine data series for Average True Range
  • Multiplier: Factor used to determine the width of upper and lower bands based on ATR.
  • Offset: The offset value is used to access the data of any candle or indicator with reference to the current candle, to access the current candle data we will use the offset value of "0", to access previous candle data "-1" offset value will be used.
  • Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.

Use Cases:

  • Trend Identification: Traders utilize the Kelter Channel to identify trends in asset prices. When prices consistently stay above the upper channel line, it suggests a bullish trend, while prices remaining below the lower channel line indicate a bearish trend. This helps traders to determine the direction of the market and align their positions accordingly.
  • Overbought and Oversold Conditions: The Kelter Channel helps traders identify potential overbought and oversold conditions in the market. When prices breach the upper channel line, it may indicate that the asset is overbought, potentially signaling a reversal or correction. Conversely, breaches below the lower channel line suggest oversold conditions, indicating a potential buying opportunity.
  • Volatility Assessment: By observing the width of the Kelter Channel, traders can assess market volatility. A widening channel indicates increasing volatility, while a narrowing channel suggests decreasing volatility. This information can be valuable for traders implementing strategies that benefit from specific volatility conditions, such as trend-following or volatility breakout strategies.

This feature can be used in:

  • Market Scanner
  • Strategy Tester
  • Multi-Factor Alerts
  • Dynamic Alerts
  • Smart Checklist

Do you want to learn more? Check out our Learning Center Article.

May 13, 2024

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