Donchian Channels on a Live Gold Chart

What it shows

Three lines over the candles: the upper line at the recent highest high, the lower line at the recent lowest low, and the basis midway. The lines move in steps, since they only change when a new extreme appears or an old one falls out of the window.

How Pravex works it out

1. Upper = the highest high over the last Length candles. The current candle counts as part of the window.
2. Lower = the lowest low over the same Length candles.
3. Basis = (upper + lower) ÷ 2.
4. Offset slides all three lines to the right for a positive number and to the left for a negative one, by that many candles.

Settings

Setting	Default	What changing it does
Length	20	How many candles the highest high and lowest low look back over. A longer Length gives a wider, slower channel and marks bigger swings.
Offset	0	Moves all three lines that many candles right (positive) or left (negative). It only changes where they are drawn, not their values.

How traders read it

The classic use is the breakout. A close at the upper line means price just made a new 20-candle high; a close at the lower line, a new low. Trend followers treat those as entries, and the opposite line, or the middle one, as a place to get out.

The middle line works as a rough trend filter. Price holding above it says the recent range is being worked from the upper half, and under it from the lower half.

A flat channel means price has done nothing new for a while. A channel stretching out in one direction means it keeps making fresh extremes.

When it misleads

The current candle is inside the window, so its own high lifts the upper line the moment it forms. On a breakout candle the line is exactly the high, and the usual check is price against the line from the previous candle, not the current one. The channel only records past extremes, so in a range it gives a stream of small breakouts that fail. On gold, a single news spike can sit in the window and hold the lines far apart for the next 20 candles, even though the market has settled.

Questions and answers

Where do the three Donchian lines come from?

The upper line is the highest high of the last Length candles, the lower line the lowest low, and the middle is the average of the two.

Are 20 and 55 the turtle trading lengths?

Yes, the turtle rules used 20-day and 55-day breakouts on daily candles. Pravex starts at 20; set 55 for the slower one. On hourly gold the same numbers cover about one and two and a half trading days, not months.

Does price ever close above the upper line?

Not in the same candle, because the current candle’s high is part of the window. A new high pulls the upper line up to meet it. Compare with the line as it stood on the candle before.

Why does the channel suddenly narrow on a quiet candle?

An old extreme just left the window. When the candle that set the high drops out of the 20-candle window, the upper line falls to the next highest high in one step, even if nothing happened now.

Related: Keltner Channels, Bollinger Bands, Envelope, Ichimoku Cloud, every indicator.