Donchian Channels - Indicator Formula

The Donchian Channel is an indicator that was developed by Richard Donchain. Traders and investors can use the Donchian Channel to help determine the volatility in an asset. The indicator takes the highest high and the lowest low for "X" number of periods and the area between the high and the low is going to be your channel. If an assets price is relatively balanced, the channel will be narrower. If price has been fluctuating often the channel will be wider.

Traders can also use it for buy and sell signals as well. If an asset trades above the highest high of the chosen period, a fresh buy signal can be taken. Conversely, if an asset trades below the lowest low for the chosen period, a fresh sell signal can be taken.