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Donchian Channels for Breakouts and Support-Resistance Levels

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Summary

A Donchian channel tracks the highest high and lowest low across a chosen lookback period. Its upper and lower boundaries use the prior periods, excluding the current day so that price can cross the plotted levels. The area between those boundaries forms the channel.

The extended version described here adds internal subchannels intended to help assess price action and identify possible support and resistance levels. It can also be used like a standard Donchian channel, including for breakout analysis. The document supplies the basic calculation and intended uses, but does not explain how the subchannels are calculated or provide rules for confirming signals. It offers no backtest or other evidence that the added levels improve trading results.

Key ideas

  • A Donchian channel uses the highest high and lowest low over a selected lookback period.
  • The plotted bands exclude the current day so that price can cross them.
  • The extended version adds internal subchannels for assessing possible support and resistance.
  • The channel can be used for breakout analysis, but the document provides no performance evidence or detailed subchannel formula.

Tags

Technical indicatorsBreakout

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