Keltner Channels
Keltner channels are volatility-based bands that are placed on both sides of an asset's price and can be used to determine the direction of a trend. Keltner channels use the following variables to calculate the upper band and the lower band:
- Interval: Interval is the time period for the moving average. For example, an interval of 10 means the moving average is calculated over the last 10 days.
- Deviation Multiplier: The deviation multiplier is used to calculate how far both bands should be from the average.
- Exponential Moving Average(EMA): A weighted average of recent period prices which uses an exponentially decreasing weight from each previous price/period.
There are different ways to calculate the EMA; the Steer Protocol is using the following method:Where p and x are the previous price and the previous EMA respectively.
- Average True Range(ATR): A volatility indicator that shows how much an asset moves, on average, during a given time frame.
To calculate the ATR by hand, you must first calculate a series of true ranges (TRs). The ATR for a given interval is the greatest of the following:
- Current high minus the previous close
- Current low minus the previous close
- Current high minus the current low
The upper band and the lower band are calculated through the following formulas:
The execution of the bundle essentially refers to the calculation of these values, which are then handled by the Steer Protocol.