What is Donchian Channels?
Donchian Channels draw three lines over price. The upper band is the highest high of the last 20 bars, the lower band is the lowest low, and the basis is the midpoint between them, with the space between the bands shaded. Price touching the upper band means it has made a 20-bar high; touching the lower band means a 20-bar low. That is the whole signal the channel is built around.
Donchian Channels show the range price has covered. They do not average price, they do not tell a real breakout from a false one, and they do not predict where price goes next.
How to use Donchian Channels
- Touching a band. A bar reaching the upper band is a new 20-bar high, reaching the lower band a new 20-bar low. Breakout systems read these as the start of a move in that direction.
- Flat bands. A band stays flat until price exceeds it or the extreme drops out of the window. Long flat stretches mark a range; a band stepping up or down marks a trend.
- The basis. The midpoint shows the centre of the recent range. Price holding on one side of it shows which half of the range is in control.
- Channel width. A narrow channel means price has been confined to a small range; a wide one means it has travelled a long way.
These are ways to read the channel, not entry signals on their own.
Settings
| Setting | Default | What it changes |
|---|---|---|
| Length | 20 | Bars the highest high and lowest low are taken over. Lower gives a tighter channel and more frequent touches; higher gives a wider one and fewer, larger breakouts. Minimum 1. |
The bands always use each bar's high and low. Adjust the length in the indicator settings.
Calculation
Each bar, the indicator looks back over the last 20 bars, including the current one:
Upper = highest high of the last 20 bars
Lower = lowest low of the last 20 bars
Basis = (Upper + Lower) / 2The upper band uses the highs and the lower band the lows, not the closes. A channel built on closes would be noticeably tighter and would mark different breakouts, so the price used cannot be changed.
Because the current bar is part of the window, its high can never sit above the upper band: when price makes a new high, the band moves up with it. A breakout shows as the band stepping up or down, not as price leaving the channel.
Both extremes need a full window, so all three lines appear together on bar 20 with the default length.
Limitations
- Many breakouts fail. A new 20-bar high is a fact about the past, not a promise the move continues. In ranges, price often touches a band and reverses.
- The bands move in steps. A band can jump when an old extreme leaves the window, even if nothing happened on the current bar.
- It ignores the close. A long wick sets the band just as a close would, so one spike can widen the channel for 20 bars.
- It depends on timeframe and length. The same indicator gives a different channel on 15m than on 1D.
- It is not a strategy. On its own it carries no risk management, sizing or exit.
Frequently asked questions
Donchian Channels are three lines drawn over price. The upper band is the highest high of the last n bars, the lower band the lowest low, and the basis their midpoint. They are the classic breakout channel used by the Turtle trading rules.
A bar reaching the upper band has made a new n-bar high; a bar reaching the lower band has made a new n-bar low. Breakout approaches treat those as signals in that direction, often with the opposite band or the basis as an exit. In a sideways market expect many touches that reverse.
Donchian Channels use the actual extremes of the window, so the bands are flat until price makes a new high or low. [Keltner Channels](/library/indicator/keltner-channels) and Bollinger Bands surround a moving average with bands based on average range or standard deviation, so they move every bar.
Yes, the length. The indicator has one input, Length, default 20 with a minimum of 1. Open the indicator's settings on the chart to change it. The bands always use highs and lows; there is no source input.
No. Each value depends only on the highs and lows in its window, so values on closed bars are not revised. While the current candle is live, its high or low can push a band further out, and that settles when it closes.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in Donchian Channels already applied. On any other market, open the indicator picker on the chart and choose Donchian Channels from the Volatility group.