Wednesday, December 20, 2006

 
Technical Indicators

Keltner Channels

Keltner Channels are a volatility-based indicator that uses a pair of values placed as an "envelope" around a data field. The values are calculated by taking the Exponential Moving Average of the data for a given period and adding or subtracting twice the average true range from the moving average.

Envelope theory states that prices will most likely fall within the boundaries of the envelope. If prices drift outside their envelope this may signify a trading opportunity.

Keltner Channels are similar to Bollinger Bands and share many of their characteristics but represent volatility using high and low, rather than the standard deviation of the one field.

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