Donchian Channels

A moving average indicator developed by Richard Donchian. It plots the highest high and lowest low over the last period time intervals.

The Donchian Channel is a simple trend-following breakout system. The signals derived from this system are based on the following basic rules:

  1. When price closes above the Donchian Channel, buy long and cover short positions.
  2. When price closes below the Donchian Channel, sell short and liquidate long positions.

As you can see in the chart below, the channels are offset forward one bar. This allows the current bar to exceed the channel high or low of the previous 21 bars.