🎓 Advanced · Breakout
Donchian Channel + Pullback
Donchian upper/lower = N-period highest high / lowest low. Classic turtle-trader setup: buy N-period high breakouts, exit on opposite channel or middle. Add pullback filter to improve entry.
Setup
- Chart: daily candles with Donchian Channel (20) — upper = 20-day highest high, lower = 20-day lowest low, middle = average
- Original turtle rule: enter long on 20-day high, exit on 10-day low. Symmetric for shorts
- Pullback variant: after breakout, wait for retest of the channel line before entering — improves R:R at the cost of some missed trades
Entry
Classic: enter long on a daily close making a fresh 20-day high. Short on fresh 20-day low. Pullback variant: after the breakout day, wait for a pullback to the middle channel and enter on the first bullish candle there.
Exit
Exit long on a fresh 10-day low; exit short on a fresh 10-day high. Alternative: exit at the middle channel line for a shorter hold.
Stop-loss
Middle channel line at entry — if price falls back through it, the breakout has failed.
When it works
- Strong trending markets — Donchian is a pure trend-follower
- Markets making new multi-week highs/lows regularly
- Long enough holding period to capture the fat-tailed winners
When it fails
- Range-bound markets — 20-day highs get faded repeatedly (many small losses)
- Bearish drift markets where 20-day highs are false peaks before further drops
- Traders who over-optimise the period (55, 40, 15) — Donchian works BECAUSE it's simple
General trading rules that apply
Regardless of the specific setup, these apply to every strategy on this site:
- Never risk more than 2% of your account on a single trade
- Place a hard stop-loss before entering — no exceptions
- Journal every trade: setup, reason, outcome, one lesson
- After two consecutive losses, stop for the session
- Backtest and paper-trade for a month before deploying real capital
Every strategy here is part of our in-house catalogue, written and calibrated for Indian markets. Past behavior does not guarantee future results. Charts run against 2-year Nifty data — actual results in your account will vary. Backtest, paper-trade, and size responsibly before risking real capital.