Keltner Bands


Keltner Bands are bands that are plotted above and below a simple moving average of average price, indicating “normal” trading ranges for markets.

The Keltner indicators take two parameters. Period 1 specifies the period to smooth highs and lows, and Period 2 specifies the period to use to smooth typical price in the calculation (see below). Note: Because Keltner Bands use average price, as well as highs minus lows, the indicator does not use a price series parameter like many other indicator functions.

Chart: Keltner Bands
  • One way to use Keltner Bands is to take a long position when price closes above the upper band, and to reverse course and take a short position when price closes below the lower band.
  • Indicators based on channels, bands and envelopes are designed to encompass most price action. Therefore, price movement outside of the bands is typically considered an anomaly and, therefore, a potential trading opportunity.

Typical Price (TP) = (High + Low + Close) / 3 Band Width = Period 1 SMA of (High – Low) Center Band = Period 2 SMA of TP Upper Band = Center Band + Band Width Lower Band = Center Band – Band Width

Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.