Donchian Channel Breakout Bias Indicator with Twenty-Bar Extremes

Summary

This indicator marks price direction relative to a Donchian channel built from the highest high and lowest low over the prior twenty bars. A close above the upper boundary is colored blue, a close below the lower boundary red, and a close between them gray. The channel midpoint is also calculated. The author presents it as a visual aid for a simplified version of the Donchian four-week rule, rather than an automated trading system.

The document includes indicator logic and explains that users can adapt the display, including omitting the channel lines. It does not report a backtest, define entry or exit execution rules, or evaluate risk-adjusted performance. As a result, it teaches a way to visualize breakouts and in-channel price action, but does not establish that the coloring scheme is profitable or suitable across markets and timeframes.

Key ideas

• The channel boundaries use the highest high and lowest low from the prior twenty bars.
• Closes above or below the channel are visually marked as bullish or bearish breakouts.
• Closes inside the boundaries receive a neutral color, and the channel midpoint is available as an indicator output.
• The indicator is a visual aid and does not automate a complete trading strategy.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.