The Keltner Channel indicator is one of the tools of technical analysis used to assess market volatility and determine support and resistance levels. It consists of three lines: a central line (the average value) and two bands that are positioned above and below it, forming a channel. These bands are defined using the Average True Range (ATR), which allows for accounting for volatility changes.
The Keltner Channel is often used by traders to identify trends and potential entry or exit points from the market. When the price moves close to the upper line of the channel, it may signal overbought conditions, while approaching the lower line signals oversold conditions. This indicator helps minimize the impact of random market fluctuations by providing clear signals for decision-making.