Keltner is based on Average True Range how does that differ from what Bollinger bands are constructed from?
Brandon, The defaults for Keltner on my chart is 10 (period) and 1 (offset). Do you suggest I use 2.25 for the offset? Thanks.
Keltner is based on Average True Range how does that differ from what Bollinger bands are constructed from? Bollinger Bands are constructed from standard deviations, not average true range. Not quite the same. Also, BB use a simple moving average as opposed to an exponential moving average.
Thanks for the page. I have had the idea to experiment with a bollinger band based on an ema instead of the simple moving average, didn't know there was a band based on ema till now. Max
Also, the standard deviation is calculated from close to close. There's no consideration for the high and low of any given bar, just the closing price. Whereas, Keltners use average true range which compares the high, low, and previous close of each bar. Each has its advantages. Use whichever one works (or looks, depending on how you are trading them) better.
John Bollinger recommends that you adjust the BB parameters so that it visually captures most of the price action. Experiment with this on charts of differing time bars and you'll see that the values can vary widely. I do the same with Keltners. Depending on how you are trading, or what you are using them for, your ATR factor as well as the XAvg length should be adjusted. If you trade for the occaisional large spike, then 2.5 or 3.5 ATR bands will work well. As you lengthen the XAvg, then more bars are taken into account and the width adjusts more slowly. If you want the bands to get hit more often, then use a lower factor. You'll see that these values will vary depending on the timeframe of the chart. The best thing to do is experiment with the settings to get a feel for what the indicator can show you.
I completely agree with you on keeping the charts uncluttered, although I do have a Keltner on my index charts. My individual stock charts are clean and empty. Just price on there. (Intraday, short term trading.) I think of the Keltners on my chart like the lines on a sheet of writing paper. Not mandatory, but it helps me keep my eye aligned properly so that my sentences don't curve up and down. To me, that's the biggest benefit of Keltners, keeping my eye aligned to a point of reference.
On Esignal, when editing the Keltner EMA Bands, there does not seem to be a way to modify to the suggested 2.25 input. Anyone have any clues ?