A Keltner Channel is a technical indicator that is based on volatility in markets. Consisting of three separate lines it appears similarly to Bollinger Bands when plotted on a chart. The middle line is an exponential moving average of the price and the upper and lower lines are typically set at two times the average true range. The bands expand and contract as volatility increases and decreases. Trading can take place within the band in a ranging market, or when price moves outside the band it can be taken as an overbought or oversold condition and a possible trend reversal.