Donchian channel
The highest high and lowest low over the lookback period, plotted as the channel's edges — a classic way to spot breakouts to new highs or lows.
What the numbers mean
The lookback is simply how many bars are scanned for the highest high and lowest low that form the channel edges. The original Turtle trading rules used 20 bars to enter and 10 to exit, and those remain the common defaults.
- 20 — the entry lookback in the original Turtle rules; a 20-bar high is the breakout
- 10 — the Turtles' exit lookback, used as the trailing stop
- 55 — the slower Turtle system, for catching only the largest trends
- 4 weeks — Richard Donchian's original weekly rule
How it is used
The plainest breakout tool there is: a new 20-bar high is a breakout signal, a new 20-bar low the reverse, and the opposite channel edge serves as the trailing stop.
- A new 20-bar high → long breakout signal; a new 20-bar low → the short side
- The opposite channel edge → the standard trailing stop
- The channel narrowing → a range tightening before a break
How it relates to everything else
Donchian channels are the purest breakout tool, and everything else in this section is a variation on the same question of where the edge of normal behaviour sits. Because breakout systems produce many small losses and a few large wins, they are usually run with ATR-based position sizing so the losses stay uniform.
- Donchian + ATR sizing → the classic Turtle combination
- 20-bar breakout + ADX rising → a breakout with strength behind it
- Nearly identical to the price channel; platforms differ on whether today's bar counts
What to watch for
Every breakout system pays for a long run of false starts while waiting for the one trend that funds the year. The edges also step rather than slide — one old extreme dropping out of the window can move the channel with no new price action at all.