The Donchian Channel is a technical indicator that plots a band around price action using the highest high and lowest low over a specified number of periods, typically 20. It was popularized by Richard Donchian and famously used in the Turtle Trading strategy, where breakouts above the upper band signal long entries and breakdowns below the lower band signal short entries. The channel width also serves as a measure of volatility, with wider channels indicating greater price fluctuation.
Example
“Price broke above the 20-period Donchian Channel upper band, triggering a long entry signal as part of the trader's trend-following breakout strategy.”