The Keltner Channel one of several technical indicators that Forex traders rely on. Used in conjunction with other indicators, it can help you to improve your Forex trading.
What Is the Keltner Channel?
Various technical indicators that Forex traders use inform them about the current trends and volatility level of the market. The Keltner Channel is one of these indicators. Devised in the 1960’s by Chester W. Keltner, this indicator is one of several that rely on the use of bands.
Bands in technical indicators have an upper level and a lower level. Traders can learn a great deal from the information between these two levels, or the band. Some common examples of technical indicators that use bands are Bollinger Bands, Envelopes, and Donchian Channels. There are others, as well.
Technical indicators that use bands can help a trader more easily spot levels that have been overbought or oversold, among other factors.
The Keltner Channel Is Unique
If you’re going to rely on technical indicators to help you with your Forex trades—and you should—it’s best to understand how they work.
The Keltner Channel calculates volatility by taking into account the average true range indicator. You could do these calculations manually, but today’s indicators do them for you automatically.
As shown in the illustration above, the Keltner Channel has three lines. There is the upper channel line, the bottom channel line, and the midline.
If you want to do the calculations manually, take the midline value and multiply it by 1.5. Then add that number to the midline value