Keltner Channel

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The Keltner Channel was first introduced by Chester Keltner in the 1960s. The original formula used simple moving averages (SMA) and the high-low price range to calculate the bands. In the 1980s, a new formula was introduced that used Average True Range (ATR). The ATR method is commonly used today.

The Keltner Channel is a volatility-based technical indicator composed of three separate lines. The middle line is an Exponential Moving Average (EMA) of the price. Additional lines are placed above and below the EMA. The upper band is typically set two times the ATR above the EMA, and the lower band is typically set two times the ATR below the EMA. The bands expand and contract as volatility (measured by ATR) expands and contracts.

Keltner Channels vs. Bollinger Bands
These two indicators are quite similar. Keltner Channels use ATR to calculate the upper and lower bands while Bollinger Bands use standard deviation instead.

The interpretation of the indicators is similar, although since the calculations are different the two indicators may provide slightly different information or trade signals.

Refs:

• https://www.investopedia.com/terms/k/keltnerchannel.asp