Ch 6 · Indicator
Volatility Lagging

Donchian Channels

Upper channel = highest high of last N bars; lower = lowest low; middle = midpoint. Turtle-trader breakout system.

Formula

Upper = max(High) over N bars
Lower = min(Low) over N bars
Middle = (Upper + Lower) / 2

What it's for

Breakout systems (enter on N-day high, exit on shorter-N low). Simple, mechanical, works in trending markets.

When it fails

Range-bound markets fire many false breakouts. Late entries — you're buying the high, not the pullback.

On the chart

Nifty 50 daily bars with Donchian Channels pre-loaded:

Where it's used on this site

1 strategy uses Donchian Channels: