The breakout indicator behind the famous Turtle Trading system.
Start Automating Free βWant to automate this strategy? Try auto-Trading free β no credit card required.
Overview
Donchian Channels, developed by commodity trader Richard Donchian, plot the highest high and lowest low over a user-defined period as upper and lower bands, with a midline at the average. Price above the upper band signals a new N-period high (bullish breakout); price below the lower band signals a new N-period low (bearish breakout).
The indicator became famous as the core of the Turtle Trading System, where Richard Dennis used 20-day and 55-day Donchian channel breakouts as entry signals. The Turtle Traders, a group of novice traders trained by Dennis in 1983, famously became highly profitable by rigorously following these breakout rules β demonstrating that systematic, rules-based trading can succeed without intuition or experience.
A long entry is triggered when price closes above the 20-day upper band; a short when it closes below the lower band. Exits use the 10-day channel: a long is exited when price hits the 10-day lower band, and a short when it hits the 10-day upper band. Position sizing is ATR-based as described in the Turtle rulebook.
Donchian Channels are equally useful as a trend-following entry mechanism and as a support/resistance visualisation tool, with the midline acting as a dynamic mean.
Strategy Code
This is a TradingView Pine Script example for this indicator. Paste it into the TradingView Pine Editor, add it to your chart, and adjust inputs for your market and timeframe.
//@version=6
strategy("Donchian Channels", overlay=true)
len = input.int(20, "Breakout Length")
upper = ta.highest(high, len)
lower = ta.lowest(low, len)This is a thinkorswim ThinkScript example for this indicator. Open thinkorswim, create a custom study, paste the script, and apply it to your chart.
input length = 20;
def upper = Highest(high, length);
def lower = Lowest(low, length);
def buySignal = close > upper[1];
def sellSignal = close < lower[1];Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
Explore More
All Strategies & Signals