Keltner Channels

Bands around an EMA, spaced by how far the market typically moves.

What it measures

An EMA of the closes, with bands atrMultiplier × ATR above and below. Using ATR rather than standard deviation makes the bands smoother than Bollinger Bands.

How traders read it

Traders read closes outside the channel as a strong move, and use the channel’s slope for direction. Bollinger Bands inside the Keltner Channel is a common definition of a squeeze.

Formula

middle = EMA(emaPeriods)
lower = middle − atrMultiplier × ATR(atrPeriods)
upper = middle + atrMultiplier × ATR(atrPeriods)

Settings and output

Call: keltnerChannels(emaPeriods, atrPeriods, atrMultiplier)

Setting	Chart default
`emaPeriods`: EMA Periods	20
`atrPeriods`: ATR Periods	10
`atrMultiplier`: ATR Multiplier	2

What you get: a list of 3, in this order: 1. a number (“Keltner Channels”); 2. a number; 3. a number (“EMA”).

Warm-up: with keltnerChannels(20, 10, 2), it asks for 20 bars of history and a run-up of 40, and its first value came on bar 21 of the example data.

Chart

Keltner Channels drawn by its own code on example prices

The prices are made up, hourly, and the same on every page, so the chart shows how the indicator behaves, not how a market behaved.

In an algorithm

function onIntervalClose() {
  const channel = keltnerChannels(20, 10, 2);
  if (OPEN_POSITIONS_COUNT === 0 && CLOSE > channel[1]) {
    openPosition("BUY", { quantity: 10000, stopLossPips: 30 });
  }
}