Keltner Trading Signals First, identify whether price is trending or ranging. Ranging Market The theory is that a movement that starts at one price band is likely to carry to the other. Go long when prices turn up at or below the lower band. Close your position if price turns down near the upper band or crosses to below the moving average. Go short when price turns down at or above the upper band. Use reversal signals to identify turning points close to the upper and lower bands.
Go long when price breaks above the upper band. Set a stop loss below the moving average and exit if price crosses below the moving average. Go short when price turns below the lower band. Set a stop loss above the moving average and exit if price crosses above the moving average. Keltner originally used the lower and upper bands for exits, but these tend to be late. Example The RJ CRB Commodities Index down-trend is displayed with the modified version of Keltner Channels with 20-day exponential moving average, 10-day ATR and Keltner bands set at 2. Example 2 Long-term traders may prefer to use longer moving average and ATR settings.