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Volatility Indicators
Donchian Channels
Donchian Channels consist of three lines: an upper band (highest high), a lower band (lowest low), and a median line. It helps identify breakouts and market volatility.
Dynamic Chart Demo
Indicator Line Price
* This chart uses synthetic data to demonstrate the indicator's behavior in typical market conditions.
Core Usage
Breakout Trading: Entering when price breaks the upper or lower bands.
Trend Following: Staying in a trade as long as price stays on one side of the median.
Volatility Measurement: Wider channels indicate higher volatility.
Advantages
- Easy to visualize breakouts
- Captures major trends
- Objective logic
Limitations
- Can be late to exit
- Noisy in ranges
- Simple calculation may lack depth
Calculation Logic
Upper = Max(High, n), Lower = Min(Low, n), Median = (Upper + Lower) / 2
Understanding the mathematical logic behind indicators helps you interpret signals more accurately and avoid misuse in unsuitable market environments.
Common Trading Strategies
Strategy 1
Turtle Trading Strategy
A famous trend-following system based on 20-day and 55-day Donchian breakouts.
S1
S2
S3
BUY
SELL
Signal simulation for: Turtle Trading Strategy
Buy
Sell
Best For
「Breakout and trend traders.」
Note: Technical indicators are mathematical calculations based on historical price and volume. They should be used as part of a comprehensive trading system, not as a standalone entry signal.