Trends/Volatility and bands

Keltner channels

An exponential average with lines above and below it set by the average true range, a measure of how much price moves in a bar.

Volatility and bandsBest on 3M, 6M, 1YAlso called Keltner bands

Illustration of the Keltner channels shape. It is a sketch, not real price data.

What it shows

Keltner channels have a middle line (20-bar EMA) and two outer lines set at 2 times the 10-bar average true range above and below it. Average true range (ATR) is the average size of a bar's range, including gaps.

Unlike Bollinger bands, which use standard deviation, Keltner channels use bar range. They are usually smoother.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Compute the 20-bar EMA of the close (middle).
Compute the 10-bar ATR.
Upper line = EMA + 2 × ATR.
Lower line = EMA − 2 × ATR.

Starting values: EMA 20; ATR 10; Multiplier 2. These are proposed and will be tuned on real price data before launch.

How to read it

The gray line is the EMA. Blue lines are the channel edges.
The channel is smoother than Bollinger bands.
Price outside the channel is farther from its average than 2 average bar ranges.

Status labels you may see

Label	What it means
Inside the channel	Close is between the lines.
Above the channel	Close is above the upper line.
Below the channel	Close is below the lower line.

What cancels it

Nothing cancels it.

What traders check next

How often price touches the edges.
Whether Bollinger bands are inside the channel (a squeeze by some definitions).
The slope of the middle line.

Limits

The multiplier of 2 is a convention.
Versions differ in how they compute the middle line.
It lags.

Try it in forecastviz

Open any ticker and choose Volatility and bands → Keltner channels in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with Bollinger bands and ATR bands on the same chart.

Open on a ticker

Questions

How is it different from Bollinger bands?

The width comes from average bar range instead of standard deviation.

Why use ATR?

It includes gaps, so it shows the true size of moves.