Donchian channel
A Donchian channel plots the highest high and lowest low of the last n bars. A close above the upper line is a breakout, which is the entry in the Turtle trading system.
How Donchian channel is calculated
Upper = highest high of the last n bars. Lower = lowest low of the last n bars. Middle = their average. Richard Donchian used it in the 1950s and the Turtle traders popularised a 20-day entry and a 10-day exit.
How it is read
The channel widens in volatile markets and narrows in quiet ones. Price at the upper line means it is at an n-bar high.
Common mistakes
- Including the current bar in the window, which makes a breakout impossible by definition.
- Using the same n for entries and exits without testing what the exit length does.
- Trading it in a market that has no trends, where each breakout reverses.
Test it yourself
The Lab's Highest and Lowest indicators are the two Donchian lines. Enter when the close crosses above Highest(high, 20), shifted so the window excludes today. The Lab charges trading costs on every trade, fills on the next day's open, and shows how many attempts you have made.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.