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Home / Education / Technical Analysis Learning Center / Keltner Channel

Keltner Channel

This moving average system by Chester W. Keltner consists of an n-day moving average of the “typical price” (sometimes referred to as “average price,” ((H+L+C)/3), plotted with a channel formed by adding and subtracting an n-bar moving average of the high-low range to or from the moving average of the typical price. Thus, the width of the channel adjusts to market volatility.

Download our free guide, Futures Trading: Technical Analysis for Beginners,  today!

Properties

Period: The number of bars in a chart. If the chart displays daily data, then period denotes days; in weekly charts, the period will stand for weeks, and so on. The application uses a default of 10.

Calculation

The study has two plots: a KCHigh and a KCLow.

The user parameter is the number of periods for the Moving Average of the Typical Price and the Moving Average of the High-Low Range (Period, default: 10)

For each bar:

  • Calculate the Absolute High-Low Range: ABS( (H-L)/2 )
  • Calculate the Typical Price. This is (High + Low + Close) / 3
  • Beginning with Period n bar:
    • Calculate a simple moving average of the Typical Price (MATypicalPrice).
    • Calculate the KCHigh: MATypicalPrice + MARange.
    • Calculate the KCLow: MATypicalPrice – MARange.

Content Source: FutureSource

Read our guide, Futures Trading: Technical Analysis for Beginners

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