Trends/Volatility and bands

Donchian channels

A channel made from the highest high and lowest low of the last N bars.

Volatility and bandsBest on 3M, 6M, 1YAlso called price channel

Illustration of the Donchian channels shape. It is a sketch, not real price data.

What it shows

Richard Donchian's channel is the simplest of the band indicators. The upper line is the highest high of the last N bars and the lower line is the lowest low. The lines are stepped, because they only change when a new high or low enters or leaves the window.

The channel shows the full recent range. A bar reaching the upper line has made a new N-bar high.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Choose N (20).
Upper line = highest high of the last N bars.
Lower line = lowest low of the last N bars.
Plot both lines.

Starting values: N 20. These are proposed and will be tuned on real price data before launch.

How to read it

The red line is the N-bar high and the teal line is the N-bar low.
Price touching the red line means a new N-bar high.
Price touching the teal line means a new N-bar low.

Status labels you may see

Label	What it means
Inside the channel	Close is between the lines.
At the N-bar high	Close is at or within 1% of the upper line.
At the N-bar low	Close is at or within 1% of the lower line.

What cancels it

Nothing cancels it.

What traders check next

How often new highs or lows happen.
The width of the channel.
Whether the channel is sloping up or down.

Limits

The lines step, so they lag at turns.
One spike sets the line for N bars.
N is a choice.

Try it in forecastviz

Open any ticker and choose Volatility and bands → Donchian channels in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with Turtle breakout and Bollinger bands on the same chart.

Open on a ticker

Questions

Why does the line step?

It changes only when a new extreme enters or leaves the window.

Is it related to the Turtle system?

Yes. The Turtle breakout system used Donchian channels.