Keltner Channel Indicator - An upgrade for the fancy Trader Bollinger Bands
Traders are all familiar with the legendary Bollinger Bands indicator, which is used to measure the volatility of the current market. Today I will introduce to you an indicator that forms a price channel by moving averages, used to measure the elasticity of the market: Keltner Channel.
What is the Keltner Channel indicator?
The Keltner Channel Technical Indicator is a classic, developed by Chester W. Keltner in 1960. This indicator works quite similarly to the Bollinger Bands and the Envelopes indicator. Using this version of the Keltner Channel, you can adjust all parameters of the MAs. Keltner Channel has 2 versions for MT4 and MT5.
The Keltner Channel uses 3 lines: the middle line is a 10-day simple moving average (sma) that applies to the typical price ((low + high + close) / 3). The upper and lower lines are created by adding and subtracting the moving average of the daily price range (the difference between the high and the low) from the midline. In this way, the Keltner Channel created an elastic price channel.
Keltner Channel Indicator - Where to add on MetaTrader 4?
Keltner Channel is not installed by default on MT4 and MT5 platforms, you can download at the end of the article and install it on MT4 as instructed here.
Indicators Keltner Channel - Input parameters
When traders with Keltner Channel you can change the following parameters:
MA_Period (default = 10) - Phase of the middle MA;
Mode_MA (default = MODE_SMA) - Category of the middle MA;
Price_Type (default = PRICE_TYPICAL) - The applied price of the center MA.
Keltner Channel Indicator - Apply to trading
The classic strategy for use with the Keltner Channel indicator is to enter buy orders when the price closes above the upper MA and enter sell orders when the price closes below the lower line. As far as I can see, the Keltner Channel is a system that gives an effective and accurate input signal. The stop loss based on the stop loss is also quite classic (you can see on the chart, there are still some wrong signals), the take profit point is quite high and the intersection with the midline.
Keltner Channel is used as a tool to trade breakout. New Trader brothers can use Keltner Channel because of its simplicity but its effectiveness, but I recommend using some other indicators to confirm the entry signal.
Above, I have introduced to you the Keltner Channel indicator - a channel using moving averages used in breakout trading. You download it for trial, if there is a problem, please comment below.