Donchian Channels

What is the definition of Donchian Channels?

The Donchian channel is created by taking the highest high and lowest low of the previous N trading periods for a security. A channel is created between the high and low prices which is often filled with a colour on stock trading charts as illustrated below.

Stockopedia offers a 20 period and 55 period Donchian Channels as default in the chart package.

Most traders use the Donchian channel as an indicator to judge breakouts. If a stock moves above or below the previous Donchian Channel high/low it indicates a purchase or sale point.

Donchian Channel Chart

Stockopedia explains Donchian Channels...

The Donchian channel has been used as part of a trend following system very extensively by systematic traders - most famously by the famous Turtle Traders founded by Richard Donchian - click the link to learn more.

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