What it is
Chester Keltner described the first version in the 1960s; the modern form, popularised by Linda Bradford Raschke, uses an exponential moving average and the average true range. ATR measures the normal size of a candle, including gaps, so the channel widens when candles get bigger and narrows when they shrink.
Because ATR moves more smoothly than standard deviation, Keltner bands are steadier than Bollinger Bands. Price closes outside them less often, so a close outside carries more meaning.
How it is calculated
Middle line: the 20 period EMA of the close. True range for each candle: the largest of high minus low, the gap between the high and the previous close, and the gap between the low and the previous close. ATR: the smoothed average of the true range over 10 candles. Upper band: middle line plus 2 x ATR. Lower band: middle line minus 2 x ATR.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| length | 20 | 2 to 400 | Length of the EMA that forms the middle line. |
| width | 2 | 0.5 to 6 | How many ATRs the bands sit from the middle. Smaller widths are touched more often; 2.5 or 3 marks only strong pushes. |
| ATR length | 10 | 1 to 400 | How many candles the ATR averages. Shorter reacts faster to a change in candle size. |
How to read it
How to trade it
- 1
Breakout: on a 1 hour US30 chart, a close above the upper band with the EMA sloping up is the trigger. Enter on the next candle's open.
- 2
Stop at the middle EMA, or 1 ATR below the entry if the EMA is far away. On US30 1 hour that is often 60 to 120 points; use the live ATR.
- 3
Pullback entry: after a breakout, wait for price to dip to the middle EMA and close back above it. Stop 1 ATR below the EMA.
- 4
Target the opposite move of 2 ATR, or trail the stop under the middle line and exit on a close below it.
A close back below the middle EMA after a long breakout cancels the trade idea. In a pullback entry, a close below the lower band shows the trend has broken.
On WickSpeak, the Keltner Channel writes a plain-English reading on the live candle: where price sits in the channel, how to trade it and what would prove it wrong. In Playbook you can test: price closes above the upper band, price closes below the lower band, price is inside the bands, price is above it, or price is below it. Combine one of these with a trend condition and backtest it on past candles with your own costs.
Best markets and timeframes
Keltner Channels suit trending markets such as gold, US30 and NAS100 on 15 minute to 4 hour charts. On forex they work best on pairs that trend, such as GBPJPY, rather than slow ranging pairs.
Common mistakes
- Fading every close outside the channel. Keltner closes outside are rarer than Bollinger ones, and many of them are the start of a trend.
- Using a fixed point stop instead of one tied to ATR, so the stop is too tight in busy sessions and too loose in quiet ones.
- Ignoring the slope of the middle line. Breakouts with a flat EMA fail more often.
Works well with
Questions traders ask
What is the difference between Keltner Channels and Bollinger Bands?
Keltner Channels set their width from ATR, the average candle size, while Bollinger Bands use the standard deviation of closes. Keltner bands are steadier and smoother; Bollinger Bands pinch and balloon more. When Bollinger Bands sit inside the Keltner Channel, many traders call it a squeeze.
What are the standard Keltner Channel settings?
The common modern setting is a 20 period EMA with bands 2 ATR either side, and that is the WickSpeak default, with ATR measured over 10 candles. Some traders use 1.5 ATR for more frequent signals.
Is a close above the Keltner Channel bullish?
Usually, yes. It shows a push bigger than the market's normal candle size allows for, which often comes at the start of a trend. It still needs a stop, normally at the middle line.
Can Keltner Channels be used for scalping?
They can, on 1 to 5 minute charts, as long as the stop and target fit the ATR at that timeframe and your costs are counted. Narrow ATR on very fast charts means spreads take a large share of each move.