What is Donchian channel indicator and how to use it? (video post)


 Earlier in one post we talked about the Donchian Channel indicator but that was a text-based post and I wanted to bring in a video based post on the topic for an added clarity and also for someone who prefer videos over texts.

The video above on Donchian channel is short but informative.

Just to recapitulate things, here are some key takeaways from the video-

✅ A Donchian Channel is a volatility indicator.

This indicator has three bands a middle band and one band each above and below this middle band. The middle band is usually a 20 period (default setting) Moving Average. The upper and lower bands are highest high and lowest low for a defined period, usually 20.

The interpretation of the Donchian channel largely done in conjunction with prevailing trend.

        In an uptrend, a price touching the upper band suggests the price is overstretched upwards, so it's not time to open a new position. You should wait for price to come back to middle band to enter the trade. There is possibility of reversal when price touches the lower band while the stock is in uptrend.

Converse is true for downtrend.

In a sideways trend, price touching the upper band might suggests a breakout while price touching the lower band suggests a breakdown.




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