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Breakout
What price is a Donchian channel breakout waiting for?
Donchian channel breakout
What it bets
A close at, or a touch of, the highest or lowest price of the past N bars means this range has opened.
How the rule is written
The upper band is the highest price of the past N bars. The lower band is the lowest price of the past N bars. A break above is long. A break below is short or an exit. N is the whole core parameter of this rule. It does not include the turtle skip rule, and it does not say to add size according to the volatility in N.
When it fails
Too short an N, and the edges of the range get pierced every day. Too long an N, and entries are rare, and all of them are late.
Do not confuse it with
A prior high or prior low can be a swing point, and the number of bars between two swings is not fixed. Donchian writes the window as a fixed N. The turtles take this kind of breakout and then add position size, pyramiding, and a filter.