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.
Properties
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. This application uses a default of 10.Calculation
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:
1. Calculate the Absolute High-Low Range: ABS( (H-L) )
2. Calculate the Typical Price. This is (High + Low + Close) / 3
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.