Keltner Bands
The Keltner Band is a technical analysis indicator that is used by traders to identify potential entry and exit points in the market. It was developed by Chester W. Keltner in the 1950s and is based on the concept of volatility bands. The Keltner Band is a band of lines that is plotted around the price of an asset and is used to identify trends, overbought and oversold conditions, and potential breakouts.
Keltner Band Overview
The Keltner Band is a technical analysis indicator that is used by traders to identify potential entry and exit points in the market. It was developed by Chester W. Keltner in the 1950s and is based on the concept of volatility bands. The Keltner Band is a band of lines that is plotted around the price of an asset and is used to identify trends, overbought and oversold conditions, and potential breakouts.
What is the Keltner Band?
The Keltner Band is a technical analysis indicator that is used to identify trends and potential entry and exit points in the market. It is a band of lines that is plotted around the price of an asset, with the upper band representing an overbought condition, the lower band representing an oversold condition, and the middle band representing the current trend. The Keltner Band is based on the concept of volatility bands, which are used to measure the degree of price movement in an asset.
Where did the Keltner Band come from?
The Keltner Band was developed by Chester W. Keltner in the 1950s. Keltner was a market technician and a pioneer in the field of technical analysis. He developed the Keltner Band as a tool to help traders identify trends and potential entry and exit points in the market. His work laid the foundation for the development of many other technical analysis tools and techniques that are widely used by traders today.
How is the Keltner Band calculated?
The Keltner Band is calculated using the following formulas:
Middle Band = 20-period EMA
Upper Band = Middle Band + (2 * Average True Range)
Lower Band = Middle Band - (2 * Average True Range)
In these formulas, the Middle Band is a 20-period exponential moving average (EMA) of the price of the asset, and the Upper Band and Lower Band are calculated using the Average True Range (ATR), which is a measure of volatility. The Upper Band is set at a distance of two times the ATR above the Middle Band, and the Lower Band is set at a distance of two times the ATR below the Middle Band.
How to trade with the Keltner Band
Traders can use the Keltner Band to identify potential entry and exit points in the market. Some common strategies that traders use with the Keltner Band include:
- Trend-following strategy: If the price of the asset is above the Middle Band, it may indicate an uptrend, and if the price of the asset is below the Middle Band, it may indicate a downtrend. Traders can use this information to enter and exit trades based on the direction of the trend.
- Overbought and oversold strategy: If the price of the asset is near the Upper Band, it may indicate that the asset is overbought, and if the price of the asset is near the Lower Band, it may indicate that the asset is oversold. Traders can use this information to enter or exit trades based on these conditions.
Traders should always do their own research and carefully consider the risks and uncertainties involved in any trade before making a decision.