Keltner Channels
Learn Keltner Channels - ATR-based volatility channels. Compare to Bollinger Bands and use for squeeze trading.
What are Keltner Channels?
Keltner Channels were developed by Chester Keltner and later modified by Linda Raschke. They consist of three lines: a middle EMA line with upper and lower bands based on ATR.
Upper Band = EMA + (2 × ATR)
Lower Band = EMA - (2 × ATR)
Keltner vs Bollinger
Bollinger Bands
Uses Standard Deviation
More reactive to price spikes
Bands expand/contract
dramatically
Keltner Channels
Uses ATR
Smoother, more stable bands
Less reactive to extreme moves
The Squeeze Strategy
When Bollinger Bands move INSIDE Keltner Channels, it signals a "squeeze" - extremely low volatility that often precedes a big move:
- Squeeze ON: BB inside KC = low volatility, prepare for breakout
- Squeeze OFF: BB expands outside KC = breakout happening
- Trade direction: Use momentum indicator to determine breakout direction
GarudaAlgo Implementation
GarudaAlgo Enhancement
GarudaAlgo monitors the BB/KC relationship for squeeze detection. When we detect a squeeze and then a breakout with momentum confirmation, signal probability increases significantly.
Trading Strategy
- Plot both Bollinger Bands and Keltner Channels
- Watch for BB to move inside KC (squeeze)
- Use momentum indicator (MACD, RSI) to determine direction
- Enter when BB breaks outside KC with momentum confirmation
- Often produces explosive directional moves