Go short when price crosses the lower Donchian Channel. If trading futures, roll forward any open positions into the next contract on the last day of the month preceding expiration. Enter long when price crosses above the 20-Day upper Donchian Channel and exit when price penetrates a 10-Day lower Donchian Channel. Enter short when price crosses below the 20-Day lower Donchian Channel and exit when price penetrates a 10-Day upper Donchian Channel. 350-Day exponential moving average as a trend filter. Go long only if the 25-Day EMA is above the 350-Day exponential moving average and go short only where below the 350-Day EMA. Donchian Channels Donchian channels were developed by Richard Donchian, a pioneer of mechanical trend following systems.
The two outer bands are plotted as the highest high and lowest low for a set period, originally 20 days, with the optional middle band calculated as the average of the two. The objective is to enter the trend on a breakout and to ride the trend for as long as possible, avoiding shakeouts. Turtle Trading Curtis Faith in his book Way Of The Turtle describes a variation of the Donchian system used by the legendary Turtle Traders. The system also uses ATR trailing stops with a multiple of 2. Example Goldman Sachs displays the Turtle Trading settings for an up-trend, 20-day upper and 10-day lower Donchian Channels, with 63-day exponential moving average as an added trend filter. Exit when price crosses below the lower channel. Donchian Channel Setup The default setting for both Donchian Channels is 20 days.
How Good Is Your Market Analysis? Trading and the Economy, as well as new software updates. Donchian Channel Formula The upper band is calculated as the highest high for the selected period. The lower band is calculated as the lowest low for the selected period. For example, the 20-Day Donchian Channels for today are the highest high and lowest low for the preceding 20 trading days. Donchian Channel Evaluation Donchian Channels and the Aroon Oscillator give identical signals.
Readers should choose whichever format they feel most comfortable with. Available on Incredible Charts free software. Download and receive a 30-day FREE TRIAL of our Premium Service. Copyright 2001 – 2018 Incredible Charts Pty Ltd. Donchian Channel stands out among the most similar to each other trading systems the simplicity of calculations and easily readable trading signals.