Keltner Channel indicator
The Keltner indicator refers to classic technical indicators that are based on price range (channel) quotation analysis.
This instrument was named after author Chester Keltner. The indicator has proven effectiveness in the historical perspective - it was developed in 1960.
The Keltner indicator is similar to popular Bollinger bands, but they use various elements of price analysis - average true range and standard deviation.
Characteristics of the indicator
Platform: MT4, MT5.
Trade tool: any.
Trading time: relevant regardless of the length of transactions.
Setup of the indicator
This Forex indicator has three variables:
MA_Period-Defines the period of the moving average indicator that forms the Forex channel.
Mode_MA-Specifies the center line offset.
Price_Type-Takes values from 0 to 6 and is responsible for smoothing the indicator signals. The higher the value, the greater the smoothing.
The default settings are:
How does the indicator work?
The Keltner channel indicator indicates the current price range for the selected trading instrument, determines its volatility of Forex currency pairs, and allows you to find entry points.
How to use in trade?
There are 2 methods of trading using the Keltner indicator:
on a turn;
When trading on a reversal, it is recommended to open the transaction in the opposite direction from the border that the indicator tests: if the price touched the upper border, it is a signal on sale, if the lower one - on purchase.
When trading for a break, the deal is opened after a confirmed closure (two candles on the timeframe) in the direction of the break. If the upper limit is crossed, a purchase order is opened if the lower one is for sale.
Indicator operation on example USD/JPY, Н1 time frame
The Keltner indicator is convenient, thanks to the simple market entry signal it offers for either of the two strategies described. An additional advantage is the determination of the volatility level of the trading instrument.
The weak sides of the Keltner indicator include the absence of a signal to close the position to determine it, additional tools will be needed.
Perhaps you will be interested in our training material on the Bollinger strip indicator.