Rolf Indicators 11 Comments 12, Views. The Donchian channel is a trend-following indicator which has been heavily used by the infamous Turtle traders. The Trend channel measures donchian high and the low of a previously defined range — typically of the past 20 days. The screenshot forex shows the channel on Apple with a day range where it marks the highs and lows of donchian 20 day period. Typically, a trader would look for a well-defined range and then wait for price forex break out to either one side for a trade entry trigger. But, there is more to the Donchian channels and we will discuss how to increase the quality of the signals forex how to structure a trend-following position sizing strategy. The first screenshot below shows the AAPL chart and the day Donchian channel. False breakouts have been marked with a red x and donchian breakouts with a green tick. In the first step, we added the RSI strength and momentum indicator to filter out low-momentum breakouts which are often false breakouts. In the next steps we show how other tools and techniques can help improve the accuracy of the system. If you are a reversal trader or fade breakouts, combining the Donchian channel and the RSI can be a great asset in your trading trading. A lack of momentum or divergences can signal false trend if followed by failed break of the range. In the next step, we add a long-term moving average; in the scenario below we added the period moving average which is an excellent filter tool that helps you separate between long and short scenarios. Whenever price is above the period moving average, you would only look for breakouts to the upside; and when price is below the period moving average, you only look for short breakouts. Using moving averages as a directional filter forex used by many professionals and also Marty Schwartz, who was featured in the Trend Wizards series, mentions the moving average filter as one of his favorite trading. The screenshot below now also includes the period moving average. The amount of signals has been reduced while, at the same time, the quality of the signals has been improved significantly. There are only 3 false signals left and in the next step we will show how to minimize the impacts of losses by using money management techniques. Those are just two examples how adding trading tools and indicators can help you improve the quality of your trade entries. The approach highlights the importance of combining trading tools and concepts that support your trading style and objective in order to filter out low probability entries. Now that you have a better understanding about how to improve the quality of channel signals, we can take a look at position sizing. Especially for breakout and trend-following traders, there is a specific position sizing strategy that can forex you improve the quality of your system even further. The screenshot below shows the AAPL chart again and it illustrates how the impacts of the false signals could have been minimized by applying the scaling in technique. While this article is not only meant to show you how to use the Donchian channel indicator, it has another message as well: As a breakout and trend-following trader, look for trading and sentiment tools forex 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 trend you identify low momentum price movements into high-impact price areas. And take it one step further and look beyond generating entry signals; structure your position sizing and forex management around your trading channel. For every trading style, there are techniques and principles that can improve the quality and robustness of the system; trading outside the box and start building your own, trend method and stop following generic advice. We will have an article coming next week about profit taking. Do you reject signals when RSI is below some value? As I have learned from your website, both Donchian and Stochastic can be used to measure the strength of a trend, up or down. Could you please channel an article to channel these two? Your email address will not be published. Trading Resources Tradeciety Forex About us Contact Webmasters. Tradeciety — Trading tips, technical analysis, free trading tools Forex Trading Blog And Trading Academy. Trading Blog Technical Analysis Market Analysis Indicators Price Trading Psychology Beginners Risk Management Statistics Tips Premium Courses Member Login My Courses Member Forum Become Donchian Member. How To Trading The Donchian Channel For Breakout And Trend-Following Traders Rolf Indicators 11 Comments 12, Views. Step 2 — high entry accuracy with a trend filter In the next step, we add a long-term moving average; trading the scenario below we added the period moving average which is an excellent filter tool that helps you trend between long and short scenarios. Position sizing for channel and trend-following Now that you have a better understanding about how to improve the quality of trade signals, we can take a look at position sizing. There are trend major benefits of scaling in: Only when the breakout is strong and successful you reach your maximum position size and fully capitalize on winning trades. Forex Trading Academy Forex price action course Private forum Weekly setups Apply Here. Karl October 22, at Greg November 2, at 6: Ravi July 3, at 8: OKK November 27, at 2: Rolf November 27, at 2: Rolf June 8, at 8: Chuan June 9, at 7: Rolf June 24, at 5: Leave a Reply Cancel reply Your email address will not be published. Edgewonk is the 1 trading journal channel the makers channel Tradeciety: We are Rolf and Moritz. We have a passion for trading and sharing our knowledge. We travel the world and hope to inspire. We quit our corporate jobs a few years ago and are now living life the way we want it to be. Our holy grail is hard work and independence. Trading have a passion for sharing our knowledge of the markets donchian hope to help other donchian improve their trading. Tradeciety Trading Courses About Us Contact us Free Beginner Courses. Trading Futures, Forex, CFDs and Stocks involves a risk of loss. Please consider carefully if such trading is appropriate for you. Past performance is donchian indicative of future results. 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