Introduction to the Donchian Channel with EMA Indicator
The Donchian Channel with EMA is a trend-following indicator containing, as the name suggests, Donchian Channel and Exponential Moving Average.
The bands of the Donchian Channel can be used to identify the trend, breakout, and volatility of the market and are calculated on high and low of the past market data.
The Exponential Moving Average works as a trend direction filter.
When combining these two tools, traders can catch major moves in the trending markets.
It fits all kinds of timeframes and currency pairs.
The indicator 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
Signals provided by the Donchian Channel with EMA are really intuitive and will not cause you difficulties. Simply follow the suggestions below.
Buy Entry: First, identify higher high and higher low structure formation in price action. Price should trade over 20 EMA and EMA should be pointing upwards. Open long trade when the price hits the upper Donchian Channel band. Place your stop loss a few pips below the last swing low.
Sell Entry: First, identify lower high and lower low structure formation in price action. Price should trade below 20 EMA and EMA should be pointing downwards. Open short trade when the price hits the lower Donchian Channel band. Place your stop loss a few pips above the last swing high.
Exit Trade / Take Profit: Close your open position when the price cross below 20 EMA when long trade or cross above 20 EMA when short trade, or use your own preferred method of trade exit.
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.
Example of AUD/JPY M15 Chart
This screenshot below shows an example of the Donchian Channel with EMA Indicator in action.
How to set up the Donchian Channel with EMA indicator in MT4?
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.
The Donchian Channel with EMA indicator is well worth adding to your trading collection but 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.
Donchian Channel with EMA Indicator Free Download
To download the Donchian Channel with EMA Indicator for Metatrader 4 (MT4) for free just click the button below: