Donchian Channel Explained
Two lines marking the highest high and the lowest low of the last 20 sessions. Named after Richard Donchian, a pioneer of trend-following funds.
How it's calculated
Upper line: the maximum of the last 20 highs. Lower line: the minimum of the last 20 lows.
How traders use it
A close above the upper line is a breakout: the price is doing something it hasn't done in 20 sessions. Trend followers buy those breakouts and exit when the price breaks the opposite side. Breakout rules of this kind were famously used by the “Turtle Traders” in the 1980s.
What people say
It's simple and objective, which is why it's popular for systematic trading. The downside: in sideways markets it produces many false breakouts, and exits come late, giving back part of the gains.
Practise with this indicator
Open a real hidden-stock chart with only this indicator turned on and see if it helps you beat the market.
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