Keltner Channel indicator displays a Keltner channel on the price chart based on price volatility. A channel that resembles the standard Bollinger Bands, consists of three lines:
- The average line is a simple moving average with a period of 10, constructed using "typical" prices ((high + low + close) / 3);
- The upper and lower lines are the result of adding and subtracting the value of the average daily price range with the average line.
Parameters of the Keltner Channel indicator
- MA_Period (default = 10) - period of the moving average (average line).
- Mode_MA (default = MODE_SMA) - type of moving average (midline).
- Price_Type (default = PRICE_TYPICAL) - price type for the moving average (middle line).
Application in trade
Keltner Channel indicator provides for the use of the classic approach - buy when the candle closes above the upper limit of the channel, sell when the candle closes under the lower limit of the channel.
The exit from the transaction can be carried out with the use of conservative stop loss or at the crossing of the price and the middle line of the channel.
The experts of ForTrader.org recommend to use additional indicators for confirmation of signals to enter the market, because the independent use of Keltner Channel indicator gives false signals.