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Donchian Channel for Trends

 
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ol-gold-hack-no-more

Donchian Channel for Trends

Recently I became fond of Donchian Channel for intermediate trading run for swing tradings during the day when the day is very active. Donchian Channel consists of two channels one of which placed in the upper position above the candles consist of av. candle Hi reading of standard 20 bars of any time frame and the other channel below the candles having LO average candle readings of the same 20 candles. There will be a middle channel consist of av. of the HI/LO values following the track. To start, open DonC channel indicator and Apiary pivot indicator to determine the the starting candle and count to 10, 20 or 30 candles(Donchian uses 20 bar as default). Wait until the last candle is filled and and the beginning of the new candle. Place your trade. When it is uptrend, candles will be going away from the lower channel which will remain steady on a horizontal line that is being formed and at the same time Upper channel will also remain in horizontal position until the candles reaches up to it and push the upper channel to move up thus creating upward formation. If any candle reverse it's direction upper channel will stay in horizontal line while the bottom channel will be pushed downward upon getting hit(so to speak) by the downward candle motion. Rest of the time when the candles are riding HI or LO and in between both channels, all three channels will be in parallel direction until any of the candle hits th channel above or below which will create move away from the incoming candle. If following candles are consolidating, the channel line nearest to those candles will form horizontal line until the motion reverses again. The Donchian Channel traces each candle motion depicting zig zag paterns indicating both direction, length and Momentum bursts and breakouts unlike Bollinger Band which draws parabolic trace of the candle motion. Now comes the interesting part. The upper channel will draw the next 20 or whatever the number of bars in Donchian channel setting has similar to the Senkou Span-A in  Ichimoku indcator. This way you can hang on to your trade if need be. When in the middle of the space between upper and lower channel, watch for the direction lower channel indicate giving an advance indiction of the movement and of course not being interrpted with reverse candle. If you use 10, 20 or 30 SMA, it will also show the similar direction. When the trend swings the other way, usually around half the the number of bars, you close your current trade and place another one going the other way. You can also place smaller trades according to the candle color as well, thus giving you more opportunities to collect more PIPS. I hope it helps us all and make necessary comments to make it popular indicator, because it helped me to- day and yesterday after I got the hang of it.      

NB. The description of Donchian Channel taken from Investopedia.com

Thu, 10/04/2018 - 8:34pm
 
Rookie

I think you would be better served with Bolinger bands set at 1% and 2% deviation.