--- title: "Keltner Channel: How It Works - Get Funded Now" description: "The Keltner channel plots bands a multiple of ATR around a moving average. How it is built, how it compares with Bollinger Bands, and how traders use it." url: "https://getfundednow.com/learn/keltner-channel" language: "en" last_modified: "2026-09-22" publisher: "Get Funded Now (getfundednow.com)" translations: es: "https://getfundednow.com/es/learn/keltner-channel" pt-BR: "https://getfundednow.com/pt-br/learn/keltner-channel" fr: "https://getfundednow.com/fr/learn/keltner-channel" it: "https://getfundednow.com/it/learn/keltner-channel" de: "https://getfundednow.com/de/learn/keltner-channel" disclosure: "All trading at Get Funded Now is simulated. 'Funded' means a simulated or virtual account; GFN is not a broker and does not hold client funds." --- Indicators # The Keltner channel: a moving average with ATR bands. A Keltner channel is a volatility indicator that draws an upper and lower band around a moving average, each a set multiple of the average true range (ATR) away from it. A common modern setting is a 20-period exponential moving average with bands two ATRs either side. Traders use it to judge trend and stretched moves. [All trading lessons](https://getfundednow.com/learn) · [Read the trading rules →](https://getfundednow.com/rules) ## How the channel is built The middle line is a moving average of price. The bands are the middle line plus and minus a multiple of [ATR](https://getfundednow.com/learn/atr-indicator). Because ATR measures typical range, the channel widens in volatile conditions and narrows in quiet ones. The indicator is named after Chester Keltner, who described an early version in 1960 based on a simple average and the average daily range. The ATR-based version is the one most charts now use; settings vary, so state yours before testing. ## Keltner channel vs Bollinger Bands Both put bands around a moving average; they measure width differently. **Two volatility channels compared** | | Keltner channel | Bollinger Bands | | --- | --- | --- | | Band width from | Average true range | Standard deviation of closes | | Typical middle line | 20-period EMA | 20-period SMA | | Reaction to a single large bar | Smoother | Can widen sharply | | Common combined use | Bollinger Bands inside the Keltner channel is read as a squeeze | Same | ## How traders use it Trend traders read closes outside a band as strength in that direction and pullbacks to the middle line as potential entries. Range traders read touches of the bands in a flat channel as stretched moves that may revert. The two readings conflict, which is why the market's context - trending or [sideways](https://getfundednow.com/learn/sideways-market) - has to be decided first. Step by step ## How to identify it Set the channel up once and read it the same way every time. 1. Choose the moving average type and period, and the ATR period and multiple. 2. Decide whether you are reading trend (closes beyond bands) or reversion (touches of bands). 3. Check whether the channel is sloping or flat. 4. Use the channel with a separate entry rule and a stop. Worked example ## The concept, walked through ### A close outside the upper band, described An illustrative sequence in words, with round numbers standing in for price. It is not taken from any real instrument or date. 1. 1. Channel The middle line is at 100 and the bands at 97 and 103, sloping up. 2. 2. Break A strong candle closes at 104, above the upper band. 3. 3. Pullback Over the next sessions price pulls back to the middle line near 101.5. A trend reader saw strength and waited for the pullback; a reversion reader saw a stretched move. The channel did not decide between them. Common mistakes ## Where traders go wrong ### Mixing trend and reversion readings Buying the upper band on one trade and selling it on the next makes results random. ### Changing settings to fit each chart Fit settings once, then test them honestly. ### Treating the bands as support and resistance They are calculated lines, not levels traders defend. Limitations ## What it cannot tell you No chart concept predicts price. These are the limits worth keeping in view. - The channel is built from past prices and lags. - There is no reliable evidence that Keltner signals predict direction on their own. In an evaluation ## Using it on a simulated account Band-based stops scale with volatility, so position size should too. On a $100,000 account, with a daily loss limit of $3,000 on Instant or $5,000 on 1 Step and 2 Step, recalculate size whenever the ATR - and so the distance to the band - changes. - [What is the daily loss limit?](https://getfundednow.com/rules/daily-loss-limit) - Trading rule - The ceiling a band-based stop is measured against - 3% on Instant and 5% on 1 Step and 2 Step. - [Is there a maximum lot size?](https://getfundednow.com/rules/margin-and-lot-size) - Trading rule - How size is bounded on a simulated account. - [What is maximum drawdown?](https://getfundednow.com/rules/max-drawdown) - Trading rule - The overall floor beneath the account. Questions ## Asked about this concept An indicator that plots bands a multiple of the average true range above and below a moving average, widening and narrowing with volatility. Keltner channels set band width from the average true range; Bollinger Bands use the standard deviation of closing prices, which reacts more sharply to single large moves. Keep learning ## Related lessons - [ATR Indicator: Average True Range Explained](https://getfundednow.com/learn/atr-indicator) - Indicators and trading styles - The average true range - how it measures volatility, what ATR 14 means, and how traders use it to set stops and size positions. - [VWAP: Volume-Weighted Average Price](https://getfundednow.com/learn/vwap) - Indicators and trading styles - The volume-weighted average price - its formula, why it resets each session, how traders read price above and below it, and why forex volume complicates it. - [Backtesting a Trading Strategy](https://getfundednow.com/learn/backtesting) - Indicators and trading styles - How to test a strategy's rules on historical data, the costs and biases a fair test must include, and why a good backtest is not a forecast. - [CCI Indicator: Commodity Channel Index](https://getfundednow.com/learn/cci-indicator) - Indicators and trading styles - The commodity channel index - how it measures price's distance from its average, what the +100 and -100 levels are taken to mean, and its limits. Sources ## What this page relied on 1. [Keltner channel](https://en.wikipedia.org/wiki/Keltner_channel) - Wikipedia. Retrieved 23 September 2026. The channel's construction from a moving average and ATR, and Chester Keltner's original 1960 version. 2. [Average true range](https://en.wikipedia.org/wiki/Average_true_range) - Wikipedia. Retrieved 23 September 2026. The true range definition, Wilder's origin of the indicator and his 14-period smoothing. Educational content only, not investment advice or a recommendation to trade. Chart concepts describe what price has done; none of them predicts what it will do, and trading any strategy can lose money. Get Funded Now accounts are simulated and trade virtual funds. Last reviewed 22 September 2026. Ready when you are ## Your capital stays yours. The risk is ours. One evaluation fee, no time limits and up to 90% of simulated profits. Pick an account size and your credentials arrive by email within minutes. 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