Keltner Channel
Volatility envelope using a 20-period EMA as midline and ATR multiples (typically 2×) as upper and lower bands.
Formula
Middle = EMA(n, typically 20); Upper = EMA + (ATR(n) × multiplier); Lower = EMA − (ATR(n) × multiplier)
Keltner Channels wrap an EMA with bands calculated as EMA ± (ATR × multiplier). Because the bands use ATR rather than standard deviation, they tend to be smoother and less prone to sudden expansions than Bollinger Bands.
Price consistently closing above the upper band signals a strong trend; closes below the lower band signal a downtrend. When Bollinger Bands contract inside Keltner Channels, a Bollinger Squeeze is forming — a popular setup for anticipating breakouts. Keltner Channels also serve as dynamic support and resistance in trending markets.
Related Terms
Average True Range (ATR)
Volatility measure averaging the greatest of: current high–low, current high–prior close, or current low–prior close over n periods (default 14).
IntermediateBollinger Bands
Volatility envelope drawn 2 standard deviations above and below a 20-period SMA; bands widen in volatile markets and contract during consolidation.
BeginnerBollinger Bandwidth
Measures the percentage width of Bollinger Bands relative to the middle band; extreme lows signal a volatility squeeze preceding a large move.
IntermediateDonchian Channel
Breakout envelope plotting the highest high and lowest low over the past n periods (typically 20); the midline is their average.
IntermediateExponential Moving Average (EMA)
Moving average that weights recent closes more heavily via an exponential multiplier, reacting faster to price changes than the SMA.
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