Keltner Channels: Technical Analysis

Keltner channels are an indicator that is commonly used with technical analysis. You could use this type of indicator for stocks, forex, commodities or anything else that you can find on a price chart. This type of indicator attempts to give you clues as to when you should buy or sell a particular security. Here are the basics of Keltner channels.

Keltner Channels

Many traders utilize Keltner channels in order to aid their trading. These channels are essentially moving average bands that go across your price chart. When adding Keltner channels to a price chart, you will see three lines going across the screen in unison with the price. There will be a top, middle and bottom line. One represents the average high, one represents the average low and one represents the closing price of the security.

How It Is Used

The basic idea behind Keltner channels is simple. If the price closes above the top band, you need to place a sell order. If the price goes below the bottom band, you need to place a buy order. The reason that this often works is that the price tends to stay within the band of the Keltner channels.