Advanced Tools Plug-in:

DON - Donchian Channels Overlay Indicator

Donchian Channels were created by Richard Donchian, an expert in trends. The DON is a simple trend breakout system. The channel works well in trending markets, but not as well in sideways moving markets.

Donchian Channels measure volatility by placing bands at a specified period deviation. These bands are charted two standard deviations from the market price, so as the market price changes, the value of two standard deviations also changes. This value is what comprises the Donchian Channel’s band width, representing the expanding and contracting of the bands based on recent price volatility.

Calculation

Donchian Channel High = MAX (HI, n)

Donchian Channel Low = MAX (LO, n)