Donchian Channel

The Donchian Channel is a technical analysis indicator developed by commodities trader Richard Donchian that plots three lines on a price chart: the highest high (upper band), the lowest low (lower band), and the midpoint (middle line) over a specified lookback period — most commonly 20 days. The channel dynamically expands when prices make new highs or lows and contracts during periods of range-bound trading. Breakouts above the upper band are interpreted as bullish signals suggesting the beginning of an uptrend, while breakdowns below the lower band are bearish signals indicating potential downtrend initiation. The Donchian Channel is a foundational tool in trend-following and breakout trading strategies, including the famous Turtle Trading System, and is widely used in commodity, equity, and currency markets. For technical traders on Ventura Securities tracking Indian equities and derivatives, the Donchian Channel provides a clean, objective framework for identifying breakout setups, defining trend direction, and setting trailing stop-loss levels based on the dynamic lower (for long trades) or upper (for short trades) band.