
Keltner Channel Indicator
Platform: MT4 Type: Channel Last update: November 12, 2024The Keltner Channel Indicator for MT4 is one of the classic technical indicators. It has various applications, including recognition of the market trend, providing support and resistance during sideways conditions as well as detecting breakouts.
It essentialy consists of the two bands (upper and lower) and the middle line which is calculated as a proportion of the average price fluctuations over given period of time. The central moving average can be considered as median and traders should expect price to always move back to this line.
Fun fact: the origins of this indicator trace back to the 1960s, when author and trader Chester W. Keltner published his book titled How to Make Money in Commodities. He presented and described it there for the very first time publicly.
How to trade with the kelter channel indicator for mt4?
One of the best and most common trading strategies with this gauge it trend trading. In such case, the channel slope should be very steep and candlesticks are relatively often moving outside the bands. Great entry points are offered at the median or even better at the opposite band – assuming this is correction and trend will continue moving in the original direction.
Take a look at this chart showcasing strong downtrend and some good spots.
It’s also useful for flat trends. When the price is moving sideways, it’s smart to consider trades when a candlestick closes outside the bands. Of course in the direction to the opposite side, where TP1 is in the middle and TP2 at the second band. Take a look at this EUR/USD H4 chart to confirm the profitability of this approach.
The formula behind keltner channnels
Those who are interested in some technical aspects (hey geeks!), the calculations are based on the following formula:
- The Upper Band: EMA + (Multiplier * ATR)
- The Lower Band: EMA – (Multiplier * ATR)
- The Middle Line: EMA
As you can see, it uses data from the EMA (Exponential Moving Average) and the ATR (Average True Range) to calculate its bands.
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