The Keltner Channel indicator for MetaTrader 4 is a custom indicator which became renowned in Kester Cheltner’s book “How to Make Money in Commodities”. The Keltner Channels are basically volatility-based envelopes that are placed above and below an exponential moving average.
The Keltner_Chanel indicator shares a lot of similarity with the Bollinger Bands, which deploys the standard deviation to set its bands. On the other hand, the indicator uses the Average True Range (ATR) in setting its channel distance.
The indicator channels are placed two Average True Range values below and above the 20-day exponential moving average. The direction of the channel is determined by the exponential moving average while the channel’s width is set by the Average True Range.
It is a trend following indicator that can also be deployed in spotting reversals along with breakouts in channel and determining the direction of channel. When we have a flat market, the indicator can be used to spot overbought and oversold levels.
The design for indicators like the Keltner_Chanel is to encompass most price action. As a result, movement above or below the channel bands are worth notetaking since they’re quite rare. Strong moves in one direction or another are indicative of trends.
It is typically a show of extraordinary strength or weakness when price surges pass either the upper or lower channel line respectively. It is clear that such moves can alert the exhaustion of a trend and the possible start of another.
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (periodMA, periodATR, kshift), Colors, width & Style.
Time frames: 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: trend, volatility