The Keltner channel is one of the most popular trend indicators. It looks a lot like Bollinger Bands. The channel represents two lines along the lower and upper boundaries of the trading range with a moving average in the middle. However, in reality, these are two completely different indicators: Bollinger Bands show the range of movement, while the Keltner Channel defines the beginning of the trend.
Among other things, the borders of the Keltner channel, along with the Bollinger Bands, are able to determine the oversold/overbought boundaries.
So, if the price goes out of the channel boundaries, it is considered that the price enters the overbought/oversold zone and, as a rule, it is followed by a correction towards the moving average line.
If the price goes out of the channel from below, it is a buy signal (long), if the price goes out of the channel from above, it is a sell signal (short).
For calculations of the indicator Keltner Channel in Veles is used Length 20 and Multiplication 2.
Length is the period, how many candlesticks are taken to calculate the indicator’s work.