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What is Donicheon Channel?
Donchian Channel
The Donchian Channel is a highest/lowest price-based channel indicator developed by Richard Donchian in the 1960s.
Top: Highest price in N period
Bottom: Lowest price in period N
Middle: (Top + Bottom) / 2
Default setting: 20 periods
Simple yet powerful. In particular, it is the indicator that became the basis of the famous strategy called Turtle Trading.
Turtle Trading and Donicheon Channel
Turtle Trading, created by world-renowned trader Richard Dennis in 1983, uses the Donny Chun Channel breakout as a key signal:
Entry signal: Go long when the top of the Donicheon channel breaks on the 20th.
Short when the channel breaks below the 20th
Liquidation signal: Liquidation upon departure on the other side of the 10-day channel.
It's a simple rule, but historically it has produced very high returns.
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Practical use of Donicheon Channel
Breakout Strategy
Conditions: Based on 20 bags
Long: price closes above 20-day high + volume increases
Short: price closes below 20-day low + volume increases
Stop Loss: Opposite the 10-day channel midline
Target: None (maintain until trend ends)
Mean reversion within a channel
Condition: Sideways market (ADX < 25 confirmed)
Bottom channel touch → long (midline goal)
Touch top channel → short (midline goal)
Comparison of 3 channels
| Donicheon | Bollinger Band | Keltner | |
|---|---|---|---|
| Basics | Highest/lowest | SMA + standard deviation | EMA + ATR |
| Features | Simplest | most sensitive | most stable |
| Best use | Breakout Strategy | Squeeze detection | Trend Following |
Related guides
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