What is Donchian Channel indicator (Trading Strategy)

In a simple word, Donchian Channel indicator bands plotted on a specific Period high and low.

Donchian Channel indicator has 3 Line (Upper Line, Middle Line, Lower Line). The upper line plotted on the higher side & Lower Line Plotted on the Lower side of the candle. The middle line is the average of High and low line.

Donchian Channel indicator setting

Donchian Channel setting

Settings

  • High Period: By default value is 20. This means Donchian Upper Line will plot on the 20 periods ( candle) peak point.
  • Low Period: By default value is 20. This means Donchian Lower Line will Plot on the 20 Periods Lowest point.
  • Channel Fill: Using this it’s will fill channel by black color (channel means, the gap between upper & Lower line)
  • Donchian High: This is the Upper band( Upper Line) color.
  • Donchian Median: This is the Middle Line color.
  • Donchian Low: This is the Lower band( lower Line) color.

What donchian channel indicator tells you

  • Specific Period High and low price & Plot bands on Candle. So that you can easily find historical High low price movement.
  • This will also tells you, support, Resistance, Breakout, Breakdown position.

Donchian Channel indicator trading strategy

  • This indicator Plotted on Specific period high and lows point. so that in the range-bound market, you can find support zone in the lower band & Resistance zone in the upper band. You can buy near the lower band and sell it near the upper band. Similarly, you can sell stock near the upper band and buy near the lower band. It’s can possibly in Range bound market.
  • Also, If share price breaks a specific period high. So this is the price breakout, & share price can rise more After breakout.
  • If share Price breaks specific period Lowest price and falling, so this is the price breakdown, & share price can fall more after a breakdown.

Conclusion

DC indicator bands are plotted on specific Period high and Low point. that will help to find support, Resistance, breakout, Breakdown, High & Low point.

The difference between the Donchian channel indicator & Bollinger band’s indicator is Donchian bands, defined specific period high/ lows. But Bollinger bands are specific periods SMA with Standard deviations, and calculated Line will be plotted on the upper side and lower side.

D bands only define the top and low points. So if any changes in inside the bands that will not reflect in This indicator.

*Read Related Post for more information.

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