Keltner breakout down event
Marks one-minute closes under the lower Keltner band; common at default settings, so read a run as a brief dip.
The rule draws a Keltner channel on the close, high and low: a middle line that is an exponential moving average of the close, and a lower band set mult average true ranges below it. It fires on a bar whose close is under that lower band, with the band scaled by (1 - band), so a positive band demands a deeper break. Despite the name, it is a per-bar test of the close against the band, with no check for a cross or for the direction of earlier bars.
How to read it
- Each marker sits on a candle whose close finished under the lower band.
- Consecutive markers form one run; the first marker of a run is the bar where price first broke under the band.
- By default the band sits two average true ranges under the moving average, so a marker means a close well below its recent average.
- Markers are common on one-minute bars, so treat a single marker as a prompt to look, not a trade signal.
What it outputs
- Close below lower band
- Marks each bar whose close is under the lower Keltner band. A run of consecutive marks is one dip below the band.
When it fires
Fires on each bar whose close is under the lower band. The first marker of a run opens it; SPY produced about 28 runs a day, averaging about four bars each. It means price fell well below its recent average range, a stretched dip, not a confirmed reversal.
Settings
- ema_window
- Length of the EMA midline the lower band hangs from. Raising it lags the midline behind price, so in a falling market the band sits higher and fires more often. Lowering it keeps the midline near price and fires less in a steady slide.
- atr_window
- Bars in the average true range that sets band width. Lowering it lets one wide bar drop the band quickly, so the signal reacts to bursts of volatility. Raising it steadies the width, so the trigger moves more slowly.
- mult
- Band distance below the midline, in average true ranges; default 2. Raising it lowers the band, so fewer closes break it. At 0 the band is the midline itself. Negative values lift it above the midline, so it fires on far more bars.
- band
- Scales the trigger to lower times (1 minus band), a share of the price rather than of the band width. Near a price of 765, 0.01 moves the trigger about 7.65 dollars lower. Negative values raise it and fire more. At 1 it never fires for positive prices.
Pitfalls
- Not rare at default settings: about 12% of SPY one-minute bars in the sample sit under the band, so markers crowd the candles.
- No cross is required, so a long sell-off shows as one long run rather than repeated breakouts. The facts show how often it fires, not whether those dips reverse.
- Negative mult or band values are accepted without warning and fire on far more bars; the sample covered defaults only.