Donchian Channel Calculator
Calculate Donchian Channel upper, lower, and middle lines from N-period highest high and lowest low.
The breakout system used by the Turtles.
Richard Donchian was the godfather of trend following. He published the channel rule in the 1960s. The math is the simplest of any indicator on the page:
- Upper channel = highest high of the last N bars
- Lower channel = lowest low of the last N bars
- Middle channel = (upper + lower) / 2
Default N is 20. The original Donchian rule: buy on a close above the upper channel of the last 20 days, sell on a close below the lower channel.
The Turtles. In 1983 Richard Dennis and William Eckhardt taught a group of trainees a system built almost entirely on Donchian channels. The famous “Turtle Traders” used:
- 20-day breakout for entries
- 10-day breakout for exits
- 55-day breakout as the slower system
- ATR-based position sizing on top
The training experiment turned $5 million in starting capital into nine-figure aggregate profits over the next several years. The system itself was published widely after the originals retired and is still tradeable in current markets, though with thinner edges.
Why a stupid-simple system works. It captures every major trend. If oil rallies for six months, you are long from the early breakout. If gold dumps for a year, you are short. The cost is many small whipsaw losses in choppy markets — the Donchian system loses on 60-65% of trades and makes its money on the 5-10% that turn into runners.
Channel width matters. Tight channels (low N or recently consolidated) signal that volatility is compressed and a breakout may be near. Wide channels mean either you are in a strong trend or you are picking a stale window.
Comparison to Bollinger. Bollinger Bands hug the average price using standard deviation. Donchian uses absolute extremes. Bollinger is for mean-reversion bias and volatility regime. Donchian is for trend-following and breakouts. Different tools, different jobs.
Worked example. Last 20 daily bars: highest high = 152.40, lowest low = 138.20, current close = 151.10.
- Upper = 152.40
- Lower = 138.20
- Middle = 145.30
- Channel width = 14.20 (9.3% of price)
Close at 151.10 is in the upper third of the channel. A close above 152.40 is the breakout signal. Without a close above, the channel is just describing the recent range.