KC Overview
Keltner Channels (KC) consist of an EMA center line with upper and lower channels set at a multiple of ATR (Average True Range) away. Unlike Bollinger Bands (which use standard deviation), KC uses ATR for channel width — making the channels smoother and more consistent.
KC + BB together form the basis of the “TTM Squeeze” setup: when Bollinger Bands move inside Keltner Channels, extreme compression is occurring, and a large breakout is imminent.
How Keltner Channels Works
Section titled “How Keltner Channels Works”Core Concept
Section titled “Core Concept”- Calculate center line: Moving average of price over n periods
- Calculate bands: Apply offset (ATR, StdDev, or percentage) above and below center
- Compare price to bands: Price above upper = breakout/overbought, below lower = breakdown/oversold
Key Characteristics:
- Volatility Envelope = Bands define price boundaries
- Overlay Display = Plotted directly on the price chart
- Dynamic Width = Width adapts to market conditions
Visual Interpretation
Section titled “Visual Interpretation”KC Behavior:
- Price breaking above upper band suggests bullish breakout
- Price breaking below lower band suggests bearish breakdown
- Price between bands = within normal range
Trading Signals Available on Reversion
Section titled “Trading Signals Available on Reversion”These are the signal names you select when configuring KC in the algorithm builder or via the MCP agent:
| Signal | Triggers When | Typical Use |
|---|---|---|
price_above_upperBand | Price crosses above the upper channel | Breakout above volatility envelope |
price_below_lowerBand | Price crosses below the lower channel | Breakdown below volatility envelope |
Display: Overlay (on price chart)
Category: Volatility
Threshold range: Price-based
Key Characteristics
Section titled “Key Characteristics”What Keltner Channels Does Well:
- Volatility Measurement: Keltner Channels excels at identifying price extremes
- Visual Clarity: Bands clearly show price boundaries on the chart
- Works Across All Markets: Universal application
What to Watch Out For:
- Trend Riding: Price can stay outside bands in strong trends
- No Directional Bias: Band breaks don’t predict direction alone
When to Use Keltner Channels:
- Breakout Trading: Trade breaks of KC bands with trend confirmation
- Mean Reversion: Trade band touches in ranging markets (ADX < 20)
When NOT to Use Keltner Channels:
- Without Trend Context: Always confirm with ADX or similar
- Strong Trending Markets Alone: Price rides bands for extended periods