Donchian Channel | Indicators for Scalping

A simple yet effective indicator for scalping →

Hey there!

Today we’ll be discussing the versatile Donchian Channels, a variation of which was used by the famous ‘Turtle Traders’ of 1983.

Understanding the Donchian Channels

Named after renowned futures trader Richard Donchain, the Donchian Channels are a set of technical indicators that seek to identify bullish and bearish extremes that favor reversals as well as higher and lower breakouts, breakdowns, and emerging trends.

They are made up of 3 bands - an upper band marking the highest high of a security over past ‘n’ periods, and a lower band marking the lowest low over the same period. The middle band is an average of the two bands.

Leveraging the Donchian Channels

Built originally for use on a weekly time frame, this indicator has been discovered to work brilliantly on a 15-minute time frame as well.

Using the indicator with a 20-period setting (i.e. n = 20 candles) generates good signals for scalping trades.

The trend, slope, and width of the channels convey essential information about the price trend and the expected movement of the security. 

Note that the Donchian Channel is a lagging indicator and shouldn't be considered as the only signal for taking a trade.

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