High accuracy “MA Donchian Channel Forex Trading Strategy” – The Donchian channel is a useful indicator for seeing the volatility of a market price.
If a price is stable the Donchian channel will be relatively narrow. If the price fluctuates a lot the Donchian channel will be wider.
Its primary use, however, is for providing signals for long and short positions.
If a security trades above its highest n periods high, then a long is established. If it trades below its lowest n periods low, then a short is established.
- Time Frame: M5 or higher
- Currency Pairs: Any
- Moving Average
- AY Donchian Channel
- Real MACD
- Force Index
- Eslanek ScotLowry
Limitations of Using Donchian Channels – Markets move according to many cycles of activity. An arbitrary or commonly used N period value for Donchian Channels may not reflect current market conditions, generating false signals that can undermine trading and investment performance.
Trading the 4-hour and above is the best approach for “Donchian Channel Trend Momentum Strategy“, so I am always interested in looking at other peoples swing trading systems that use these timeframes.
- Download TraderVersity.Com-DonchianChannelSystemTrendMomentum (Zip File)
- Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators /
- Copy the “TraderVersity.Com-DonchianChannelSystemTrendMomentum.tpl” file (template) to your Metatrader Directory …/templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex system
- Right-click on your trading chart and hover on “Template”
- Move right to select TraderVersity.Com-DonchianChannelSystemTrendMomentum
- You will see “Donchian Channel Trend Momentum Trading System” is available on your Chart
- Moving Average: Price closed above the MA line
- AY Donchian Channel: Price above its last highest high n Donchian Channel high
- Real MACD:
- Histogram > 0 level
- Blue MA line > Red MA line
- Force Index: Above level 0 line
- Eslanek ScotLowry: Most time frames are blue
- Moving Average: Price closed below the MA line
- AY Donchian Channel: Price below its last lowest low n Donchian Channel low
- Real MACD:
- Histogram < 0 level
- Blue MA line < Red MA line
- Force Index: Below level 0 line
- Eslanek ScotLowry: Most time frames are red
This article is not only meant to show you how to use the Donchian channel indicator, but it also has another message as well: you have to be conscious of your trading style and build your approach around your goals.
As a breakout and trend-following trader, look for momentum and sentiment tools that help you read what is going on and filter out trades with a lower probability.
On the other hand, if you fade false-breakouts, look for tools that help you identify low momentum price movements into high-impact price areas.