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Keltner Channel (KC)

Description

The Keltner Channel was introduced in 1960 by Chester W. Keltner in his book How To Make Money in Commodities, and is also explained by Perry Kaufman's book The New Commodity Trading Systems and Methods. Keltner Channels plots three lines, consisting of a simple moving average (typically of the average price) with upper and lower bands plotted above and below this moving average. The width of the bands is based on a user defined factor applied to the Average True Range, with this result added to and subtracted from the middle moving average line.

Formula

Middle Line = n period moving average of (High + Low + Close) / 3

Upper Band = Middle Line + ( y * ATR)

Lower Band = Middle Line - ( y * ATR)

Where:

  • n = number of periods
  • y = factor applied to the ATR
  • ATR = Average True Range of n period
Example