Keltner channels

What the numbers mean

Three settings: the period of the central EMA, the ATR lookback, and the multiplier deciding how many ATRs away the channel sits. Because ATR is an average of true range rather than a standard deviation, Keltner channels are smoother and less reactive than Bollinger Bands at similar settings.

• EMA 20 — the centre line; about one trading month
• ATR 10 — the volatility lookback that sets width
• ×2 — how many ATRs away the bands sit; 1.5 is tighter, 3 much wider
• Some platforms default to ATR 20 and a 1.5 multiplier, which behaves noticeably differently

How it is used

Used for trend-pullback entries — buying dips to the middle line in an uptrend — and paired with Bollinger Bands in the squeeze setup, where Bollinger Bands contracting inside the Keltner channel marks unusually compressed volatility.

• Price riding the upper channel → trend strength, read the same way as a Bollinger walk
• Pullbacks to the centre EMA in an uptrend → the standard continuation entry
• A close outside the channel after a squeeze → the breakout signal

How it relates to everything else

Keltner channels are the ATR member of the band family, and because ATR is an average rather than a standard deviation they are smoother and less reactive than Bollinger Bands at comparable settings. That stability is what makes the pair useful together — Bollinger Bands react to a volatility drop faster, so when they contract inside the Keltner channel it marks unusually compressed conditions.

• Bollinger inside Keltner → the squeeze setup
• Keltner = ATR width · Bollinger = deviation width · envelope = fixed %
• Shares its ATR input with Supertrend and STARC bands
• Smoother bands respond late to a gap or a shock

What to watch for

Smoother bands respond late to a genuine volatility shock, so during gaps and news the channel can badly understate the current range.