# Keltner Channel indicator guide for MT4/MT5

The Keltner Channel indicator for MT4 is a banded volatility-based tool that surrounds the price chart with three distinct envelopes. This versatile forex indicator can be automatically drawn on your MT5 chart as well. The Keltner Channel indicator is widely used among forex traders on the TradingView platform as well. Therefore, understanding the applications of the Keltner Channel as a trading strategy is crucial for our trading education today. In this guide, we will thoroughly explore the Keltner Channel indicator for MetaTrader 4 and 5, accompanied by numerous trading examples.

## What is the Keltner Channel indicator ?

Chester Keltner originally introduced Keltner Strategy based the classic Keltner channel indicator, in the 1960s, . Then in the 1980s, Linda Bradford Raschke introduced a new version of the Keltner strategy with new channel calculations.

• First, the initial middle line calculation was different. To clarify, the initial computation was based on SMA. That is to say, the Simple Moving Average. Instead of the Exponential one. That is to say, the Exponential Moving Average.
• Second, the bands’ calculation was also different. To explain, highs and lows of the price range were used previously. Mainly, to compute, respectively, the higher and lower bands. Instead of the Average True Range.

## Indicator formula and calculation

Keltner channel indicator for Tradingview uses the Exponential moving average along with the Average True Range to estimate the price range. Consequently, to estimate Keltner bands. Now let us have a deep look at the Keltner channel calculation:

• Upper Band: [E.M.A(period) + ( Multiplier x A.T.R(period) )]
• Middle Band: It represents the Basis of the KC bands calculation. Also, it represents an E.M.A(period).
• Lower Band: [E.M.A(period) – ( Multiplier x A.T.R(period) )]

## Trading examples with Keltner Channel

### Example 1

• Breakthroughs above the upper band are strong uptrend signals.
• Breakthroughs below the lower band are strong downtrend signals.
Consequently, Breakthroughs are trend strength signals. Note that those perceptions are only proper for trending markets. In other words, when the trend is already clearly defined.

In the next example, we will explain why the Keltner channel is perceived as a trend confirmation strategy.

### Example 2

If the market is trending, the Keltner channel indicator assists traders to determine trend confirmation signals on MetaTrader charts.

Uptrend confirmation signals :

During an uptrend move, we notice consecutive breakthroughs above the upper band. To explain, that is an indication of the current trend strength. Consequently, the bullish trend is strengthening and it is very likely to persist.
In short, Keltner channel MT4 is an uptrend confirmation indicator.

Downtrend confirmation signals :

During a downtrend move, we figure out consecutive breakthroughs below the lower band. To clarify, that is an indication of the present trend strength. Therefore, the bearish trend is intensifying and it is very likely to endure.
In conclusion, Keltner channel is a downtrend confirmation indicator.

Consolidation signals :

In range-bound markets, the Keltner channel indicator which is utilized for MetaTrader platforms helps traders to determine trend consolidation signals. Thus, recognizing overbought and oversold areas. To clarify, breakthroughs into overbought zones are followed by price retracement to the middle line. Similarly, breakthroughs into oversold zones are followed by price retracement to this basis line.

### Example 3

Market volatility shifts in cycles. To clarify, markets move from trending periods with high volatility to ranging periods with low volatility. And vice versa.
Traders should note that the best entry/exit points are located at the end of a low volatility period. The best Keltner Squeeze technique is to wait for the price to get trapped between Keltner bands. To explain, this signals indecision among traders before a trending move. Then, Initiate a new position in the direction of the breakout.

In conclusion, A Keltner Channel Squeeze indicates a potential explosive breakout.

## How to use it?

The Keltner channel indicator for MetaTrader also supplies trend reversal signals. In fact, it is a reversal signals provider. In this part of the course, we will discover how to use Keltner channels to trade trend reversals.

### 1. Bullish reversals

Firstly, the price continually strikes the lower band. But, without reaching the higher one or even the middle exponential line. Thereafter, the market price succeeds in reaching this higher band.
The key bullish reversal candle:

• Occurs after a trending downside movement
• Bullish candle
• closes above the upper band

As a consequence, this may suggest that:

• The downtrend is diluting
• A probable bearish reversal may emerge.

In short, bears may be willing to dominate the market.

### 2. Bearish reversals

First, the price continuously hits the upper band. But, without reaching the lower one or even the middle exponential line. Afterward, the market price succeeds in reaching this lower band.
The key reversal candle:

• Occurs after a trending upside movement
• Bearish candle
• Closes below the lower band

Consequently, this may indicate that:

• The uptrend is weakening
• A potential bullish reversal may arise.

In conclusion, bulls may be willing to dominate the market.

### 3. Bullish Breakouts

Bullish breakouts occur when bullish candles open into the Keltner channel and close above the upper band. To clarify, it is a sign of a strong uptrend move on the MetaTrader 4 chart.

### 4. Bearish Breakouts

Bearish breakouts materialize when bearish candles open into the Keltner channel and close under the lower band. To explain, it is a sign of a strong downtrend move on the MetaTrader 5 chart.

Keltner channel Indicator for MT4 is a banded in MT4 charts. This MetaTrader 4 indicator is composed of three different bands. To clarify, there is a middle band that stands for the exponential moving average. Also, there is an upper and a lower band. Relying on the indicator settings, the price generally oscillates within the latter two bands.

One advantage of the Keltner channel indicator MT4 is to define market trends. To clarify, when the Keltner channel is upward, it indicates an uptrend. Conversely, when the Keltner channel is downward, it indicates a downtrend. Not only that, other advantages include:

• Detecting potential trend reversals
• Identifying overbought and oversold zones

The MT5 Keltner channel is a banded in MetaTrader 5. This MT5 indicator is equivalent to Moving Average and Bollinger Bands together. Because the middle line is an exponential moving average and extreme bands are comparable to Bollinger bands. Thus, there are three major bands:

• Middle band: exponential moving average of the price over a specific period. To clarify, this period is user-defined.
• Upper and Lower bands: Located, respectively, above and below the middle line. The distance is a multiple of the Average True Range. To explain, the multiple and this range period are user-defined.

### Conclusion

The Keltner channel indicator for MetaTrader is adequate for novice forex traders. Because it acts as a user-friendly volatility indicator. In fact, it helps you to detect trend confirmations in MT4 charts. But also trend reversals on the MT5 trading platform.
Thus if you have trouble figuring out the current market trend, perhaps the Keltner channel for Tradingview is a suitable indicator for you.

Moreover, the effectiveness of this tool depends on the user-defined settings. That is why traders should define their investment horizon and set the indicator up for their trading system.

In addition, the Keltner Channel trading strategy will not perform if the Keltner bands are too distant or too narrow.

### Key Takeaways

Let us recap the MT5 Keltner channel forex indicator for MetaTrader:

• It is useful for trend identification. Thus, for getting trend confirmation signals. Especially, in trending markets.
• This forex indicator could be used to trade reversals.
• It is helpful to trade overbought and oversold zones. Especially, in range-bound markets.
• A Keltner Channel Squeeze may indicate a potential explosive breakout on Tradingview charts.
• This forex tool can be used alone. But, it is better to use it with other technical tools in order to get more reliable signals.
• Additional MT4 technical indicators can be very helpful along with Keltner bands. Consequently, more accurate trading signals could be supplied.