Keltner Channels are 2 lines plotted above and below a moving average based on the ATR (average true range) of a stock. When the stock price breaks above the top of the Keltner Channel, it is considered bullish and an upwards continuation is expected. Similarly, when the stock price breaks below the bottom of the Keltner Channel, it is considered bearish and a downwards continuation is expected.
This strategy is simple: wait for price to break above the upper Keltner Channel to enter a long position, and exit when it breaks below the lower Keltner Channel. For shorting, do the complete opposite.
Keltner Channels strategy for the SPY on the 15min timeframe
Results
Testing this strategy on the SPY has returned the following profit factors:
- 1min: 0.947
- 5min: 1.435
- 15min: 1.397
- 30min: 1.148
- 1hour: 1.001
- 4hour: 0.876
- 1day: 0.956
- Average: 1.109
The Keltner Channels strategy works on different timeframes, but the best ones were on the 5 and 15 minute timeframes. Remember, different ticker symbols can provide different results.
TradingView Script
Try the Keltner Channels strategy for yourself on TradingView: https://www.tradingview.com/script/zOqvdztR-Keltner-Channels-backtestx/
Test with your own tickers and timeframes to see how well it works!