Donchian Channels


DEFINITION of 'Donchian Channels'

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

BREAKING DOWN 'Donchian Channels'

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.

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  3. Bollinger Band®

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  4. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  5. Hindenburg Omen

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  6. 52-Week High/Low

    The highest and lowest prices that a stock has traded at during ...
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  1. Is using the Donchian channel more risky or more conservative than using Bollinger ...

    Both Donchian Channels and Bollinger Bands are trend-following volatility indicators. They are meant to identify breakouts ... Read Full Answer >>
  2. What does it mean when a stock is trading near the Donchian channel, high or low?

    The Donchian channel is an easy-to-understand moving average indicator. Much like Bollinger Bands, the Donchian system uses ... Read Full Answer >>
  3. How are Donchian channels used when building trading strategies?

    Donchian channels are used to show volatility, breakouts and potential overbought/oversold conditions for a security. The ... Read Full Answer >>
  4. What are common technical indicators used along with Donchian channels?

    Traders apply a Donchian channel to a price chart to identify the points where a security's price breaks above the highest ... Read Full Answer >>
  5. What are the differences between Bollinger Bands® and Donchian Channels?

    Donchian Channels and Bollinger Bands are the most common multiband charting techniques used by technical analysts. Fundamentally, ... Read Full Answer >>
  6. What is the formula for Donchian channels and how is it calculated?

    Created by and named after Richard Donchian, the Donchian Channel is a prominent moving average indicator that tracks a security's ... Read Full Answer >>

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