Using The Donchian Trend System In Forex Mining – Donchian Channel Strategy – For the average trader, the complicated name of this indicator can be quite intimidating.
This post was originally published here. The writer, Rayner Teo is a veteran community member and expert on InvestingNote, with a username known as @Raynerand he has close to 750 followers.
Using The Donchian Trend System In Forex Mining
Because you want to measure the highest peak of the mountain so you can use it as a reference for later.
The Small Turtle System (donchian Trend +macd)
At the same time, you want to measure the lowest area of the mountain as well, so you have a good idea of where the lowest point is.
And that, my friend, is how the Donchian channel works (it’s the same chart as the “mountains” by the way).
It simply acts as a “laser pointer” to where the highs and lows are without you having to question yourself.
As you can see, you are not trying to catch and predict the tops, you are trying to follow the trend until it bends.
Donchian Channel Indicator
Since we want to buy higher and sell higher, we will use the 20-period Donchian Channel to reference our entries.
So you would want to wait for the stock to close above the upper channel (meaning it has made a 20-day high).
You will use the trailing stop loss method, which is to wait for the stock to reach a new 10-day low (10-period Donchian Channel).
Of course, depending on how aggressive you are (ie increasing your allocation per trade), your returns can be more than 15%.
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That’s why you should never take these results at face value because your results may differ from mine.
But one thing you can take away is that the market is working despite the index performing very poorly.
At that point, no matter how many adjustments I made with the Donchian Channel Trend Following strategy, the result was still the same.
I was able to break the losing streak and now I am starting to approach the break-even point in my forex portfolio.
Donchian Channel And Other Breakout Methods
So if you are the type of trader who wants to buy low and sell high, this strategy is for you.
Basically, as a swing trader, you would want to time your entries when price hits support and sell it before resistance (and vice versa for shorting).
Your goal here is to only catch one “leg” of the move instead of trying to catch the entire move…
You will wait for the price to reach the 20-day high and then wait for the strong bearish candlestick to fall short.
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The opposite is true, where we wait for the price to reach the 20-day low and then wait for the bullish candlestick to go long.
That’s why I highly suggest you familiarize yourself with candlesticks through this article here: Monster’s Guide to Candlestick Patterns
Instead of using a 10-period Donchian Channel trailing stop loss, we will place a profit at a fixed level before the opposing channel.
If you entered a short position from the upper channel, then you would want to place your profit before the lower channel.
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However, you must promise me that you will possess the knowledge learned in this guide and do your due diligence before trading live.
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Because you want to measure the highest peak of the mountain so you can use it as a reference for later.
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At the same time, you want to measure the lowest area of the mountain as well, so you have a good idea of where the lowest point is.
And that, my friend, is how the Donchian channel works (it’s the same chart as the “mountains” by the way).
It simply acts as a “laser pointer” to where the highs and lows are without you having to question yourself.
As you can see, you are not trying to catch and predict the tops, you are trying to follow the trend until it bends.
Donchian Channel Double Breakout Trading System
Since we want to buy higher and sell higher, we will use the 20-period Donchian Channel to reference our entries.
So you would want to wait for the stock to close above the upper channel (meaning it has made a 20-day high).
You will use the trailing stop loss method, which is to wait for the stock to reach a new 10-day low (10-period Donchian Channel).
Of course, depending on how aggressive you are (ie increasing your allocation per trade), your returns can be more than 15%.
Capturing Profits Using Donchian Channel Breakouts
That’s why you should never take these results at face value because your results may differ from mine.
But one thing you can take away is that the market is working despite the index performing very poorly.
At that point, no matter how many adjustments I made with the Donchian Channel Trend Following strategy, the result was still the same.
I was able to break the losing streak and now I am starting to approach the break-even point in my forex portfolio.
Understanding The Donchian Channel And Its Applications In Forex Trading
So if you are the type of trader who wants to buy low and sell high, this strategy is for you.
Basically, as a swing trader, you would want to time your entries when price hits support and sell it before resistance (and vice versa for shorting).
Your goal here is to only catch one “leg” of the move instead of trying to catch the entire move…
You will wait for the price to reach the 20-day high and then wait for the strong bearish candlestick to fall short.
Donchian Channel Indicator, Donchian’s Channel Breakout
The opposite is true, where we wait for the price to reach the 20-day low and then wait for the bullish candlestick to go long.
That’s why I highly suggest you get familiar with candlesticks through this article here: Monster’s Guide to Candlestick Patterns
Instead of using a 10-period Donchian Channel trailing stop loss, we will place a profit at a fixed level before the opposing channel.
If you entered a short position from the upper channel, then you would want to place your profit before the lower channel.
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However, you must promise me that you will possess the knowledge learned in this guide and do your due diligence before trading live.
He is the most followed trader in Singapore with more than 100,000 traders reading his blog every month…
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. Donchian channel indicator, you may have heard the name of this indicator, although it is not available on the default MT4 platform, this indicator is very popular and many traders consider it a profitable indicator.
The inventor of this indicator, called Richard Donchian, has a simple form as a dynamic channel. Donchian channel can be a breakout strategy with high probability.
Indicators For Traders: Donchian Channel
This indicator can find prices that exceed the number of highs or lows. And the results are quite accurate for trading a specific amount per hour, day or week.
We can apply this indicator, both in the state of the Forex market which is ascending or descending. But the best time is when the market is range bound.
Well, this time we are going to review the channel indicator and look for answers on what a channel breakout system is.
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Donchian Channel Strategies That Work
The Donchian channel is a technical indicator first used by Richard Donchian to measure price volatility.
This indicator is similar to Bollinger Bands, but the formula is different. If the Bollinger Band takes a standard deviation, the Donchian Channel indicator uses the 20-day high and 20-day low. Initially, this indicator uses daily time frames, but many traders use lower time frames as well.
The Donchian channel also has three lines, such as the Bollinger band, the 20-day upper channel and the 20-day lower channel and the middle line which represents the average movement between the upper and lower bands.
And in its use, it can be used to analyze forex, stocks, cryptocurrencies as well as CFDs. Upper and lower channel lines can become dynamic support and resistance zones.
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But in use, they can also be used to break trades. The most common strategy is the Donchian channel breakout system.
It only takes the highest price in “n” periods for the upper channel and the lowest price in “n” periods for the lower channel.
The standard time period is 20, but traders can choose other periods, for example 30, 50, etc.
Of course, this selection period will affect the width of the upper channel and the distance of the lower channel.
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For example, using a daily time frame with a period of 20, which means this takes data from 20 days back.
If the high price is $125.50 then it will be the upper channel and if the low price is $125 then it will be
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