Donchian Channel
Breakout envelope plotting the highest high and lowest low over the past n periods (typically 20); the midline is their average.
Formula
Upper = Highest High(n); Lower = Lowest Low(n); Middle = (Upper + Lower) / 2
Donchian Channels, developed by Richard Donchian (the "father of trend following"), draw three lines: the upper band (highest high over n bars), the lower band (lowest low over n bars), and a midline ((upper + lower) / 2).
The classic Turtle Trading system used a 20-period Donchian breakout as its entry signal: buy when price breaks above the upper band, short when it breaks below the lower band. Channel width is a raw measure of recent volatility. The midline acts as a dynamic mean-reversion target.
Related Terms
Aroon
Trend-detection indicator showing how recently the n-period high and low were set; near-100 Aroon Up signals a strong uptrend.
IntermediateAverage True Range (ATR)
Volatility measure averaging the greatest of: current high–low, current high–prior close, or current low–prior close over n periods (default 14).
IntermediateBollinger Bands
Volatility envelope drawn 2 standard deviations above and below a 20-period SMA; bands widen in volatile markets and contract during consolidation.
BeginnerChoppiness Index
Measures whether a market is trending (low values near 38.2) or range-bound / choppy (high values near 61.8) using ATR and the highest-high/lowest-low range.
IntermediateKeltner Channel
Volatility envelope using a 20-period EMA as midline and ATR multiples (typically 2×) as upper and lower bands.
IntermediateParabolic SAR
Trend-following stop-and-reverse indicator that plots dots above (downtrend) or below (uptrend) price, accelerating as the trend matures.
IntermediatePivot Points
Price levels calculated from the prior period's high, low, and close that act as projected support (S1–S3) and resistance (R1–R3) for the next session.
Beginner