Donchian Channel Indicator

Donchian Channel Indicator for MT4

Introduction to the Donchian Channel Indicator

The Donchian Channel Indicator was originally developed by Richard Donchian. The indicator defines the beginning of a new trend and comes in handy for forex traders utilizing trend-following and breakout strategies. The boundaries of the Donchian Channel are based on calculating the lowest low and the highest high market levels for the last N-th periods (20 by default).

The Donchian Channel Indicator fits all kinds of timeframes and currency pairs. It is displayed directly on the main trading chart. The default settings can be modified directly from the input tab. Feel free to experiment with the settings and parameters to fit your personal preferences.

How does it work? How to apply in trading?

Trading Rules Explanation

The Donchian Channel Indicator provides very decent entry points, but also additional re-entry points during pullbacks. Trades are triggered at the touch of the bands. The detailed trading instructions are provided below.

Buy Signal

Follow these steps for a long trade:

  • Price breaks the upper Donchian Channel band
  • Open buy trade
  • Set stop loss few pips below the lower band of the Donchian Channel band (it works as trailing stop)
  • A price retracement provides additional opportunity for another entry point
  • Take profit or exit trade whenever price breaks the lower Donchian Channel band

Donchian Channel Indicator Example of Buy Trade

Sell Signal

Follow these steps for a short trade:

  • Price breaks the lower Donchian Channel band
  • Open sell trade
  • Set stop loss above the upper band of the Donchian Channel band (it works as trailing stop)
  • A price retracement provides additional opportunity for another entry point
  • Take profit or exit trade whenever price breaks the upper Donchian Channel band

Donchian Channel Indicator Example of Sell Trade

As always, to achieve good results, remember about proper money management. To be a profitable trader you need to master discipline, emotions, and psychology. It is crucial to know when to trade, but also when not to trade. Avoid trading during unfavorable times and market conditions like low volume/volatility conditions, beyond major sessions, exotic currency pairs, wider spread, etc.

How to set up the Donchian Channel indicator in MetaTrader (MT4)?

Installation Guide

Download the Donchian Channel.rar archive at the bottom of this post, unpack it, then copy and paste the Donchian Channel.ex4 or Donchian Channel.mq4 indicator files into the MQL4 folder of the Metatrader 4 trading platform.

You can gain access to this folder by clicking the top menu options, which goes as follows:

File > Open Data Folder > MQL4 > Indicators (paste here).

Now go to the left side of your MT4 terminal. In the Navigator find the gauge name, right-click it and select Attach to the chart.

Bottom Line

The Donchian Channel indicator is well worth adding to your trading collection. A good forex indicator will most probably enhance your chance of success. Nonetheless, remember about having realistic expectations. Just like any other technical analysis tool, is not capable of providing accurate signals 100% of the time. Thus, this forex indicator provides false signals occasionally. Its performance will vary significantly depending on market conditions. Feel free to develop your own trading system based around it. Don’t forget that we still have more great free forex MT4 indicators to download and try.

Download Free Forex MT4 Donchian Channel Indicator

To download the Donchian Channel indicator for Metatrader 4 (MT4) for free just click the button below:

Donchian Channel Indicator Free Download

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