looked like this on an intraday basis. Donchian channels again indicated a buyback position during the mid-week of May 2016. For instance, if we look at the same Apple chart below, we have highlighted where there are two consecutive price increases/decreases confirming our buy/sell trends with Donchian channels. The next step will outline the characteristics of the Crawling Along pattern. Now, all we got to do is to outline the rules of our entry strategy. If you think in terms of supply and demand, when the price is crawling along the upper Donchian channel, without departing too far away it means there are lots of buyers that try to push the price higher. 39 represents a 20 day Wilder ATR. After this consolidation period, the contract then broke out higher which was the start of a strong run-up.
The channel width gives us a measurement of the market volatility. Establishment period of 20 candles, allows maximally consider the impact that it has on the market cyclical changes. If you want to use a more aggressive stop, you can place an order right at the middle line.
Donchian trading system
Remember, Donchian originally created the indicator to trade commodities. Note* the above was an example of a BUY trade using our Donchian Channel Strategy PDF. Therefore if you start to trade a choppy market on an intraday basis, you will be overloaded with false signals. The principle of the calculation of the channel, proposed back in the 70's, the author of the methodology by Richard Donchian, is to determine the maximum and minimum values of the price for a certain period. Market volatility, spotting breakouts.