Volatility / breakout indicator
Donchian Channels
Bands of the highest high and lowest low, the classic breakout tool.
What is Donchian Channels?
Donchian Channels, created by Richard Donchian, plot the highest high and lowest low over a chosen lookback as upper and lower bands, with a midline between them. They are the foundation of classic breakout systems, including the famous Turtle Traders.
How it works
A close above the upper channel signals a breakout to new highs; a close below the lower channel a breakdown. The midline acts as a mean and a trailing reference. The lookback length sets sensitivity, shorter channels break more often.
How traders use it
- ▸Breakout entries: trade new N-bar highs/lows.
- ▸Trend filter: price in the upper half = bullish bias.
- ▸Trailing exit: exit on a break of a shorter opposite channel.
- ▸Range detection: flat channels mark consolidation.
Build Donchian Channels without code in Algovex
Donchian Channels are a node in Algovex with upper/lower/mid outputs, build breakout or channel rules, backtest, and export. No code required.
Key parameters
| Parameter | What it does |
|---|---|
| length | Lookback for the high/low channel (commonly 20). |
Frequently asked questions
What is the Turtle trading strategy?
The Turtle system was a famous breakout strategy that bought N-bar highs and sold N-bar lows using Donchian Channels, with strict position sizing and trailing exits. You can build and backtest a Donchian breakout strategy in Algovex.