The Donchian channel, named for Richard Donchian, plots the highest high and lowest low over the last N bars as two horizontal envelopes around price. The midline is the average of the two. The 20-bar Donchian breakout was the entry rule for the original Turtle Trading system in the 1980s.
Reads: price closing above the upper channel = N-bar high breakout (long signal). Price closing below the lower channel = N-bar low (short signal). The channel itself acts as a trailing stop for breakout trades.
Unlike Bollinger Bands, Donchian channels do not use any statistical assumption — they are just the rolling max / min. They are the canonical implementation of a 'breakout above prior range' trading rule.
Formula
Upper = max(high, N) Lower = min(low, N) Mid = (Upper + Lower) / 2
Example
20-bar high = 52,000, 20-bar low = 48,000. Mid = 50,000. Today closes at 52,100 — a 20-bar upside breakout.
How Noon Barbari uses Donchian channel
Every concept here is implemented in the platform. Open the relevant docs or tool to see it in action.
See the indicators reference →Related terms
- Indicators
Bollinger Bands
A moving average flanked by ±k standard deviations of price. k = 2 by default.
- Indicators
Average true range (ATR)
Rolling average of the true range — the canonical volatility measure for stops.
- Market structure
Swing high
A local peak: a bar whose high is higher than the N bars on each side.
- Market structure
Break of structure (BOS)
Price closing through a prior swing point in the direction of the existing trend.