Measuring Donchian Breakout Proximity in ATR Units

Summary

This indicator concept extends a Donchian channel by showing how close the current price is to either channel boundary. For both the upper and lower edges, its panel displays the trigger level, the raw price distance, and that distance scaled by average true range. A proximity bar gives a visual cue as price approaches a potential breakout level.

ATR scaling makes distances easier to compare across instruments and volatility conditions: the same absolute price gap can represent very different degrees of closeness in quiet and active markets. The document illustrates this with an example reading expressed as a fraction of ATR and describes configurable color bands for approaching the thresholds. It presents a visualization for monitoring breakout proximity, not a complete entry or exit system. There are no backtest results, performance evidence, or rules for confirming a breakout, managing a position, or accounting for false signals.

Key ideas

• The panel tracks distance to both the upper and lower Donchian channel boundaries.
• It reports trigger levels and distances in both price units and ATR units.
• ATR normalization makes proximity more comparable across symbols and volatility regimes.
• A proximity bar and color bands visually indicate when price nears a trigger.
• The indicator describes proximity, but supplies no tested trading rules or performance evidence.

Tags

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