Keltner Channels

Keltner channels wrap an average in a volatility envelope. The width breathes with ATR, so a quiet market draws a tight band and a wild market draws a wide one. A close outside the band means price has moved more than the multiple of recent true range away from its average. Chester Keltner's original used a simpler range. The ATR version most platforms plot today follows Linda Raschke's later practice.

Compare with Bollinger bands, which use standard deviation of closes. Keltner uses ATR, so gaps and the full high-low range drive the width. A squeeze setup is sometimes a Bollinger band inside a Keltner channel: closes are quiet even relative to true range. That is a joint reading, not a property of Keltner alone.

A walk up the upper band is a strong trend, not an automatic short. Mean-reversion traders fade a tag of the band only in a range, with the middle line as the magnet. Trend traders use a close outside the band as a breakout filter and the middle line as a trail.

Shorting the upper Keltner band in a trend because the channel was touched. Touching the band is what trends do. Also mixing the original Keltner formula with the ATR formula and expecting the same trades.

The multiplier is a choice. At 1 the band is noise. At 3 it is rarely touched. Whatever you pick will look clever on the sample you tuned and ordinary on the next one. State it and leave it.