Q: Tips

- The classic Turtle system used 20-period Donchian for entries and 10-period for exits - Donchian breakouts work best in trending markets and produce false signals in ranges - Use ATR-based position sizing alongside Donchian breakouts for proper risk management - The middle line serves as a useful trend filter — above it is bullish, below is bearish - Compare with Keltner Channels: Donchian is more reactive, Keltner is smoother - Consider using a shorter Donchian Channel for exits to lock in pr

Question 1

What is Donchian Channels?

Accepted Answer

Donchian Channels is a trend-following volatility indicator developed by Richard Donchian, the "father of trend following." It creates a channel using the highest high and lowest low over a specified period, with a middle line at the average of the two. Donchian Channels are the foundation of the famous Turtle Trading system and are widely used for breakout trading strategies.

Question 2

How it works

Accepted Answer

Donchian Channels are calculated using simple highest/lowest values: ``` Upper = Highest High over N periods Lower = Lowest Low over N periods Middle = (Upper + Lower) / 2 ``` Where N is the lookback period (default 20). The channel automatically adjusts as new highs or lows are established.

Question 3

Key features

Accepted Answer

- **Pure price action** — Based entirely on actual highs and lows, no mathematical smoothing - **Breakout system** — New channel highs/lows automatically signal breakouts - **Channel width = volatility** — Wider channels indicate higher recent volatility - **Turtle Trading foundation** — The basis of one of the most famous trading systems ever

Question 4

Buy signals

Accepted Answer

- Price breaks above the upper Donchian Channel (new N-period high) - Price crosses above the middle line from below (momentum shift) - Channel contracts then price breaks upper band (volatility expansion breakout)

Question 5

Sell signals

Accepted Answer

- Price breaks below the lower Donchian Channel (new N-period low) - Price crosses below the middle line from above (momentum shift) - Channel contracts then price breaks lower band (volatility expansion breakout)

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Number of candles for highest high / lowest low |

Question 7

Sub-components

Accepted Answer

| Component | Description | |-----------|-------------| | `DONCHIAN_UPPER(20)` | Upper channel (highest high) | | `DONCHIAN_LOWER(20)` | Lower channel (lowest low) |

Question 8

Example conditions

Accepted Answer

| Condition | Description | |-----------|-------------| | `close > DONCHIAN_UPPER(20)` | New 20-period high (bullish breakout) | | `close < DONCHIAN_LOWER(20)` | New 20-period low (bearish breakout) | | `close cross_over DONCHIAN_UPPER(20)` | Breakout above channel | | `close cross_under DONCHIAN_LOWER(20)` | Breakdown below channel |

Question 9

Tips

Accepted Answer

- The classic Turtle system used 20-period Donchian for entries and 10-period for exits - Donchian breakouts work best in trending markets and produce false signals in ranges - Use ATR-based position sizing alongside Donchian breakouts for proper risk management - The middle line serves as a useful trend filter — above it is bullish, below is bearish - Compare with Keltner Channels: Donchian is more reactive, Keltner is smoother - Consider using a shorter Donchian Channel for exits to lock in pr