The calculation for Keltner Channel, based on ATR, is as follows:
For the top or Plus Band, the ATR is calculated over 10 periods, doubled and
added to a 20 period exponential moving average
For the bottom or Minus Band, the ATR is calculated over 10 periods, doubled and
subtracted from a 20 period exponential moving average.
STARC Bands consist of two lines that show upper and lower areas of support
to help the trader identify significant price levels. The channels are developed by using the
“average true range” (ATR) from past periods as well as implementing a simple moving average
(SMA) in its equation to finding high probable trades. Like other indicators that allow the trader
to customize their methods, so do STARC Bands. The recommended settings suggest the trader
uses 15 periods for the ATR along with a 6 period close for the SMA.
Upper STARC: SMA + (ATR X 2*)
Lower STARC: SMA – (ATR X 2*)
The difference is between the MA they use, EMA for Keltner and SMA for Starc.
This moving average system by Chester W. Keltner consists of an n-day moving average of the « typical price », sometimes referred to as « average price, » ((H+L+C)/3), plotted with a channel formed by adding and subtracting an n-bar moving average of the high-low range to or from the moving average of the typical price. Thus, the width of the channel adjusts to market volatility.
The study has two plots: a KCHigh and a KCLow. The user parameter is the number of periods for the Moving Average of the Typical Price and the Moving Average of the High-Low Range (Period, default: 10) For each bar:
- Calculate the Absolute High-Low Range: ABS( (H-L) )
- Calculate the Typical Price. (High + Low + Close) / 3
- Beginning with Periodn bar:
- Calculate a simple moving average of the Typical Price (MATypicalPrice).
- Calculate a simple moving average of the High-Low Range (MARange).
- Calculate the KCHigh: MATypicalPrice + MARange.
- Calculate the KCLow: MATypicalPrice – MARange.
High: The Symbol field on which the study will be calculated. The application uses the Aspect « High ».
Low: The Symbol field on which the study will be calculated. The application uses the Aspect « Low ».
Close: The Symbol field on which the study will be calculated. The application uses the Aspect « Close ».
Period: The number of bars in a chart. If the chart displays daily data, then period denotes days; in weekly charts, the period will stand for weeks, and so on. The application uses a default of 10.
Multiplier: A number, positive or negative, defining the number of bars (periods) to shift the formula line. The upper and lower channel lines are the centerline plus and minus this multiplier, times the modified moving average of true range.
STARC (Stoller Average Range Channels) show three lines which create a channel around an ordinary moving average. These three lines are:
- An n–period Simple Moving Average (SMA).
- An upper band, which is the n-period SMA plus an m-period Average True Range (ATR) multiplied by a constant K.
- A lower band, which is the n-period SMA minus an m-period ATR multiplied by a constant K.
STARC bands were developed by Manning Stoller.
Similar to Bollinger Bands, STARC bands tighten in steady markets and loosen in volatile markets. However, rather than being based on the closing prices used by Bollinger bands, the STARC bands are calculated using the Average True Range (ATR), thus giving a more in-depth snapshot of market volatility.
When a price curve penetrates a Bollinger Band, it may indicate the continuation of a price move; in contrast, the STARC Bandstend to define upper and lower limits for normal price action. Therefore, some traders use STARC bands to determine the level of risk prior to entry.
- n, the number of periods used to calculate the SMA shown by the middle line. Default: 5 periods.
- m, the number of periods used to calculate the ATR used to create the upper and lower bands. Default: 15 periods.
- K, a constant value used to plot the upper and lower bands (the higher the value, the more pronounced are the upper and lower bands). Default: 1.33.
The following calculations are illustrated using the default parameters (5, 15, 1.33). Click on the links to go to more detailed algorithms for SMA and ATR.
Middle band: a Simple Moving Average (SMA) over n periods.
Middle = SMA(n) = SMA(5)
Upper Band: the SMA of the middle band plus an Average True Range (ATR) over m periods multiplied by K.
Upper = SMA(n) + (ATR(m)*K) = SMA(5) + (ATR(15)*1.33)
Lower Band: the SMA minus the ATR.
Lower = SMA(n) – (ATR(m)*K) = SMA(5) – (ATR(15)*1.33)