Keltner Channel

Keltner Channels are three lines: a central exponential moving average (typically 20 periods) and two outer bands set at 2x ATR above and below it. They look similar to Bollinger Bands but they use ATR instead of standard deviation for the band calculation. ATR makes Keltner Channels smoother than Bollinger Bands and less prone to extreme expansion/contraction during news spikes. Keltner Channels are useful for trend-following. In a strong uptrend, price walks the upper channel. In a strong downtrend, price walks the lower channel. The middle line acts as dynamic support/resistance during pullbacks. Breakouts beyond the channels are rare and usually mean a powerful move is starting. The "squeeze" concept (when Keltner Channels and Bollinger Bands compress together) is one of the most reliable volatility-breakout signals in trading.