Donchian Channel

Highest-high / lowest-low channel — breakouts.

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.

Upper = max(high, N)
Lower = min(low, N)
Mid = (Upper + Lower) / 2

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