Keltner Channel
Keltner Channels are volatility-based bands around an EMA. The upper and lower bands are typically set at 2x ATR above and below the 20-period EMA.
Understanding the Concept
Keltner Channels are similar to Bollinger Bands but use ATR instead of standard deviation, making them smoother. Price touching the upper band suggests overbought; lower band suggests oversold. But the real power is in breakouts—when price closes outside the channel, that's a strong trend signal. Some traders use Keltner with Bollinger Bands together: when Bollinger squeezes inside Keltner, a big move is coming. The squeeze setup (search "TTM Squeeze") has become popular for anticipating explosive breakouts.
Real-World Example
Ethereum trades within Keltner Channels for two weeks. Suddenly, a large candle closes above the upper band with volume. That's not overbought—it's a breakout. Traders go long expecting trend continuation.
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