The Donchian Channel Indicator for MT4 is a very well-known technical indicator.
The Donchian Channel was one of the indicators used in the famous Turtle trading strategy.
Primarily, this indicator is a trend following indicator and was intended for use on larger time frame charts.
The indicator plots the high and low lines for a set period of time.
When to go long using the Donchian Channel Indicator?
Wait for the Donchian Channel Indicator to turn horizontal for a few candlesticks.
Following this, take a long position when price breakouts above the upper horizontal line that is plotted by the Donchian Channel Indicator.
When to exit your long positions?
Exit long positions when price begins to move back to the lower Donchian channel, assuming that the trend has been up.
You can also trade with a fixed risk to reward set up.
When to go short using the Donchian Channel Indicator?
Wait for the Donchian Channel Indicator to turn horizontal for a few candlesticks. Following this, take a short position when price breakouts below the lower horizontal line that is plotted by the Donchian Channel Indicator.
When to exit your Short positions?
Exit the short positions when the price moves back to the upper Donchian channel line. This is assuming that there has been a strong downtrend for a few periods.
Where to set the stop loss?
The stop loss is set near the recent pivot low or high point depending on whether you are long or short in the market. You can also set your stop loss to the upper or lower Donchian channel and trade until you get stopped out.
The Donchian Channel Indicator is relatively simple to use and understand technical trading indicators.
It is best advised to use the Donchian Channel Indicator alongside other technical indicators to gain additional market confirmation before you trade.
How to Increase Your Winning Ratio with the Donchian Channel Indicator MT4?
When you add the Donchian Channel Indicator and use it together with a proven trend trading system like the Elite Swing Trader or Simple Trend Trading System, you can only expect to achieve a better win ratio and better risk-reward ratio.
Recommended Time Frames
Technically speaking, you can use this MT4 indicator for all time frames.
However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly.
We recommend that you use higher time frames like the H4 or even higher for better consistency.
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