Price channel
Very similar to the Donchian Channel: the highest high and lowest low over a chosen period, marking the range price has traded within.
What the numbers mean
Same idea and same setting as the Donchian channel: the number of bars searched for the extreme high and low that define the channel. Some platforms offset the channel by a bar so that today's price cannot form its own boundary.
- 20 — the usual lookback for the extreme high and low
- 50 — a slower channel for position trading
- Some platforms offset by one bar so today cannot form its own boundary
How it is used
Used to define the operating range of the recent past and to time breakouts from it.
- A close beyond the channel → breakout
- The channel edges → obvious places for stops and targets
- A long flat channel → a range that has held; the break from it tends to be sharper
How it relates to everything else
Functionally the same tool as the Donchian channel, and read the same way. It steps rather than slides — an old extreme ageing out of the window moves the channel with no new price action at all, which is worth knowing before treating an edge as a live level.
- Effectively identical to the Donchian channel
- Pairs with volume, since breakouts without volume are the ones that fail
- The highs and lows it marks are the same ones Aroon is counting the age of
What to watch for
As with Donchian, the channel widens instantly on a spike and narrows only when that spike ages out of the window.