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Keltner ChannelsKC

Keltner Channels are volatility bands drawn above and below an exponential moving average, usually a 20-period EMA plus and minus two times the Average True Range. The EMA shows direction and the ATR sets the width.

Keltner Channels look a lot like Bollinger Bands, but they measure volatility differently and behave more smoothly. Traders use them to judge trend direction, spot breakouts and find overextended prices. This entry explains how the channels are built, how to read them and how they compare with Bollinger Bands.

Category
Indicators and Tools
Reading time
4 min
Also called
Keltner Channel, Keltner bands
Updated

Keltner Channels in plain words

Keltner Channels are volatility-based envelopes around an exponential moving average, usually placed two ATRs above and below a 20-day EMA.1

The EMA sets the direction and the Average True Range sets how wide the channel is.1

ATR measures volatility only; it says nothing about price direction.2

How Keltner Channels are built, step by step

  1. Calculate the middle line

    Usually a 20-period EMA. See Moving Average.

  2. Calculate the ATR

    Often over 10 or 20 periods. See Average True Range.

  3. Upper channel

    EMA + 2 × ATR.

  4. Lower channel

    EMA − 2 × ATR.

  5. Read the slope

    A rising channel suggests an uptrend.

  6. Watch the edges

    Breaks outside the bands signal strong moves.

Worked examples

Example 1 — Calculating the bands

$47–$53

20-day EMA $50, ATR $1.50, multiplier 2.

Example 1 — Calculating the bands — calculation
Upper channel$50 + 2 × $1.50 = $53
Lower channel$50 − 2 × $1.50 = $47
Width$6

The channels are typically set two ATRs above and below the 20-day EMA.1

Example 2 — A breakout

Bullish breakout

Using Example 1's bands, the stock closes at $54.20 after a flat month, and the channel turns up.

Example 2 — A breakout — calculation
Close vs upper band$54.20 > $53
SignalPossible new uptrend

Keltner Channels are a trend-following tool that spots reversals through breakouts and changes in channel direction.1

Example 3 — Range trading a flat channel

+$3 per share

The channel is flat. Price touches the lower band at $47 and turns up toward the EMA at $50.

Example 3 — Range trading a flat channel — calculation
Entry near lower band$47
Target at middle line$50
Potential move+$3

When the trend is flat, the channel edges can mark overbought and oversold levels.1

Keltner Channels vs Bollinger Bands

AspectKeltner ChannelsBollinger Bands
Middle lineEMASMA
Width based onAverage True RangeStandard deviation
Band behaviourSmootherExpands and contracts faster
Popular comboUsed together in the squeezeSee Bollinger Bands

How traders use Keltner Channels

  • Trend direction

    The slope of the channel shows the trend. See Trend.

  • Breakouts

    Closes outside the band signal momentum. See Breakout Trading.

  • Pullback entries

    Buying near the EMA in an uptrend. See Pullback.

  • Squeeze setups

    Bollinger Bands inside Keltner Channels signal low volatility.

Advantages and disadvantages

Advantages

  • Smooth, less jumpy bands.
  • Combines trend and volatility in one view.
  • Works on any market and time frame.

Disadvantages

  • Lags price like all moving-average tools.
  • Band touches are not signals on their own.
  • Settings vary between platforms.

Going deeper

Read as far as you need. Each level builds on the one before it.

Where the idea came from

Beginner

Chester Keltner described the original version in 1960, using a 10-day average of the high-low range; Linda Bradford Raschke introduced the ATR-based version in the 1980s.1

Why ATR

Intermediate

ATR includes gaps and limit moves that a simple high-low range would miss, which makes the channel width a fuller measure of volatility.2

Tuning the multiplier

Advanced

A smaller multiplier gives more breakouts and more false signals; a larger one gives fewer, stronger signals. Test settings for each market. See Backtesting.

Common mistakes

  1. Selling every upper-band touch

    In strong trends price can ride the band.

  2. Ignoring the slope

    Direction matters more than touches.

  3. Mixing up with Bollinger

    The width uses ATR, not standard deviation.

  4. Using it alone

    Confirm with volume or price structure.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1EMA $120, ATR $4, multiplier 2. Where is the upper channel?
Q2What sets the width of Keltner Channels?

Key points to remember

  1. Keltner Channels surround an EMA with ATR-based bands.
  2. Typical setting: 20-period EMA ± 2 ATR.
  3. The slope shows trend; breakouts show momentum.
  4. In flat markets the edges can mark extremes.
  5. They are smoother than Bollinger Bands.

Frequently asked questions

What are the best Keltner Channel settings?

20-period EMA with 2 × ATR is the common default; adjust to the market and time frame.

Are Keltner Channels better than Bollinger Bands?

Neither is better; Keltner is smoother, Bollinger reacts faster to volatility changes.

Do Keltner Channels work for day trading?

Yes, they can be applied to intraday charts like any other time frame.

Further learning

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. StockCharts ChartSchool. Keltner Channels (opens in a new tab) Checked .
  2. StockCharts ChartSchool. Average True Range (ATR) (opens in a new tab) Checked .

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.