A practical guide to understanding and using the OANDA Keltner indicator on MT4 for trend identification and risk management.
Introducing the OANDA Keltner indicator
The Keltner Channel is a technical indicator developed by futures trader Chester Keltner.
It plots three lines: a central moving average and two outer bands calculated using the Average True Range (ATR) added above and below the average. The OANDA Keltner indicator is a technical analysis tool for MT4 that displays the Keltner Channel on your trading chart.
Using the OANDA Keltner indicator on MT4
While the Keltner Channel may resemble Bollinger Bands, it differs in that it uses ATR instead of standard deviation to determine the width of the outer bands.
This results in narrower bands compared to Bollinger Bands.
The Keltner Channel is mainly used for trend-following strategies. Trends occur when prices move consistently in one direction. Traders use the channel's upper and lower bands to identify these trends.
A breakout above the upper band may signal the start of an upward trend, while a drop below the lower band may indicate a downward trend.
After a trend forms, the three lines can act as dynamic support and resistance levels.
These levels can help traders set stop-loss points, identify potential buying opportunities during pullbacks, or spot potential selling opportunities during rebounds.
Keltner Channel settings
- Moving average type: Choose the type of moving average (default is EMA).
- Price for moving average: Specify the price used to calculate the average (default is the average of the high and low).
- Moving average period: Set the calculation period for the average (default is 20).
- ATR period: Select the period for ATR calculation (default is 10).
- ATR multiple: Define how many times the ATR is added/subtracted (default is 2.0).
- Alerts when price crosses upper/lower channel: Enable alerts when price breaks through the upper or lower band by selecting “Yes”.
The default settings are usually sufficient, but traders can make adjustments depending on market conditions. For example, longer periods smooth out fluctuations; increasing the ATR multiple gives wider channels and reduces false signals, which is useful in the case of more volatile currency pairs.
You can also customise the colour settings for easier interpretation:
- 0: central moving average line
- 1: upper band
- 2: lower band
This article and its contents are intended for educational purposes only and should not be considered trading advice.
