What It Is
Keltner Channels are volatility envelopes set above and below an EMA, using the Average True Range (ATR) to determine bandwidth. Developed by Chester Keltner and later refined by Linda Bradford Raschke, they combine trend direction (EMA) with volatility measurement (ATR).
Key insight: While Bollinger Bands use standard deviation, Keltner Channels use ATR. This makes Keltner Channels smoother and less prone to sudden expansions. The practical difference is that Keltner Channels are better at identifying sustained breakouts vs. Bollinger's strength in detecting volatility squeezes.
Default settings use a 20-period EMA with bands at 2× ATR above and below. About 95% of price action occurs within the bands, making closes outside them statistically significant.
Trading Application
Keltner Channels work best for trend-following entries and exits. Enter when price breaks outside the channel with confirming volume. Use the midline (EMA) as a trailing stop or profit target.
The TTM Squeeze indicator combines Keltner and Bollinger Bands to identify compression periods. When Bollinger Bands are inside Keltner Channels, the squeeze is on — prepare for a breakout.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
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Compare this reference with related structures and readings before applying it to a live chart.