Forex glossary
Donchian Channel
The Donchian Channel marks the highest high and lowest low over N observations, with their midpoint. Breakout analysis often excludes the current candle to compare price with an earlier range. The lookback, plot offset and price series must be specified.
Illustrative example
How does it work in practice?
Assume the previous 20 candles have a highest high of 1.1050 and lowest low of 1.0950. The midpoint is 1.1000; a new price of 1.1055 exceeds the earlier upper boundary by five pips.
A case to work through
A boundary that moves with price
The hypothetical highest high of the previous 20 bars is 105; the new bar's high is 107.
- A channel excluding the current bar has a 105 boundary that the new high exceeds.
- Including the new bar raises the upper boundary to 107, making the high equal to it.
What follows? Specify which window supplies the breakout level.
Example boundary: Different offsets can create apparently contradictory results.
A useful distinction
Donchian Channel / Bollinger Bands
Donchian uses window extremes; Bollinger Bands use an average and standard deviation.
Check your understanding
Distinguish a prior-bars channel from one updated by the current bar.
Show the answer and explanation
53
The new high is the maximum in that window.
Direction and strength tools
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Related terms
Sources and documentation
- StockCharts – price channels
Highest-high/lowest-low windows and channel boundaries; breakout comparison needs a defined offset.
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