Keltner Canal

The Keltner channel is a technique of technical chart analysis . It was first introduced in 1960 by Chester W. Keltner (1909-1998). It is used to illustrate price potential.

Similar to the Bollinger Bands , the graph is circled by upper and lower "bands". First a moving average is formed, the basis for this is the so-called “typical price”.

Calculation of the typical price:

The sum of the daily high, low and closing price is divided by the value 3 in order to obtain a daily average price.

${\displaystyle TP_{t}={\frac {H_{t}+L_{t}+C_{t}}{3}}}$

In the second step, the daily high is subtracted from the daily low, in this way the average value of the daily trading range is obtained. This value is a measure of mobility and can be adapted to different areas of application by multiplying it by a factor. However, this factor F was introduced later; if the factor is set to 1, this corresponds to the original formula. Keltner calculates the moving average and the daily trading range for 10 days.

interpretation

If the price breaks through the upper band, this should indicate a further possible price increase in the future. Conversely, a break in the lower band can indicate further falling prices.

Formulas

${\displaystyle KC_{t}^{Oben}=GD_{t}^{arith.,n}(TP)+ADR_{t}^{m}xF}$

${\displaystyle KC_{t}^{Mitte}=GD_{t}^{arith.,n}(TP)}$

${\displaystyle KC_{t}^{Unten}=GD_{t}^{arith.,n}(TP)-ADR_{t}^{m}xF}$

literature

• Chester W. Keltner: How To Make Money In Commodities . Keltner Statistical Service, Kansas City 1960.
• John J. Murphy: Technical Analysis of Financial Markets. Basics, strategies, methods, applications . 11th edition. FinanzBook Verlag, Munich 2014, ISBN 978-3-89879-062-8 , pp. 452–455 (section “Starc bands and Keltner canals”).
• Oliver Paesler: Technical indicators: the ideal instrument for every success-oriented investor; Methods, strategies, implementation . FinanzBook-Verlag; [Bonn]: Investor-Verlag, Munich 2007, ISBN 978-3-89879-248-6 .