Keltner Channel

Keltner Channels are a volatility-based technical indicator consisting of three lines: a center line (typically a 20-period exponential moving average) and upper and lower bands set at a multiple of the Average True Range (ATR) above and below the center line (commonly 2× ATR). Developed by Chester Keltner in the 1960s and later refined by Linda Bradford Raschke, the indicator adapts to market volatility because ATR expands during volatile periods and contracts during quiet ones. The channels serve multiple purposes: trend identification (price consistently above the center line is bullish), overbought/oversold conditions (price touching or exceeding the outer bands), and volatility assessment (narrow channels indicate low volatility with potential for a breakout). A popular strategy is the "Keltner Channel squeeze," where the channels narrow significantly before an explosive move. Keltner Channels are often compared to Bollinger Bands — the key difference is that Keltner uses ATR (which produces smoother bands) while Bollinger uses standard deviation (which produces more reactive bands). Some traders use both together, looking for Bollinger Bands to contract inside Keltner Channels as a compression signal.