The middle line is, the upper and lower bands however are measurements of distance (think ATR) from the middle line or MA of your choice. They are similar to bollinger bands but use different computation. As to the OP, if your charting software does not have Keltner Channel then I don't know what to say except that it's a pretty standard technical indicator of most softwares packages. If the market is not in a strong trend, it's a pretty damn good indicator but that's probably true for many others as well.
Roll your own Keltner. In Keltner's description the central average is a 10-day simple moving average of the price, where the price is the average of each day's high, low and close. The outer channels are the +/- simple moving average of the past 10 days' trading ranges (ie. range low to high for each day). As modified by by Linda Rasche the Keltner is based on a 20 period exponential moving average [(H+L+C)/3]. The top channel bound is based on the ATR calculated over 10 periods, doubled and added to the central 20 period EMA. The lower channel is the same but with the ATR subtracted. Decide which you want to use and code. Either approach is easy to code as virtually all packages have SMA, EMA and ATR capabilities. Jack
I am always surprised that people accept popular indicator settings as if they were carved into stone. Think outside the box. Experiment with your own settings. You may find that the popular settings are not best for the task. To give you an idea Welles Wilder developed the RSI, ADX etc. and Larry Williams developed the Williams R for EOD data. I remember Chester Keltner peddling his goods in the 70's I am sure he also applied it to EOD data. Because of the fractal nature of the markets - credit to the above gentlemen - these are still useful tools today on even the minutest time scales but should you limit your ID settings to theirs? For example in scalping ER2 and CL I am using 77 period keltners on my constant tick bar and constant volume bar charts in Trade Station with widths of between 3 and 15 atr settings (sorry I can't give away the exact combo). The setup helps me gauge when to fade moves and when to hold off. BTW Standard Error Bands are also an interesting banding tool.
Neet, If you would read my threads or posts on other threads you would see that I have been quite generous in sharing ideas and details of my methodology. A lot of people on this board are expecting other people to provide them with the minutest details of their methods because they are not diligent or ingenious enough to find the answers themselves. It is for me to decide where to draw the line and I am not going to please those people. In light of the above your comment was totally inappropriate. Wishing you all the best in your endeavors, GC
Don't be too concerned about what Neet has to say, gurucandidate. He probably realizes that what he is getting over at Puretick is far less than optimal, and is anxiously looking around for any and all alternatives. If you have a more consistent methodology for trading than scalping 5 ticks on the YM with a 15 tick stop, he probably just wants to know what it is, that's all. Honestly, he should have just PM'd you. Jimmy Jam
Jimmy, You sure are special. After all those PT log studies you did, I'm sure you very well know I'm not exactly looking for methodologies. Find me one person that's a member or ex-member of Puretick and have them post that "Anekdoten" needs help to be consistenly profitable, one person. Envy is a bitch huh? Which is probably why you post crap about me.