The Keltner Channel is a simple but powerful trading indicator. It helps you better time your entries, improve your winning rate, and can even “predict” market turning points. And if you want to learn how to do it, then today’s post is for you.

But first…

What is a Keltner Channel and how does it work?

The Keltner Channel is an Envelop-based indicator (others include Bollinger BandsDonchian Channels, etc.).

This means it has an upper and lower boundary to help you identify potential “overbought and oversold” levels.

Note: The Keltner Channel used in this post is the modified version by Linda Rasche.

Now, the default Keltner Channel settings have three lines to it:

    • Middle Line: 20-period Exponential Moving Average (EMA)
    • Upper Channel Line: 20 EMA + (2 * Average True Range)
    • Lower Channel Line: 20 EMA – (2 * Average True Range)

You can think of the Middle Line as the mean.