Next, we need to formulate entry conditions for our trading strategies:

#1. Donchian Channel + ADX.

Conditions for the system:

• The price breaks the upper or lower border of the Donchian channel.
• The main line of the ADX trend strength must be above the pre-set ADX Level.
• If the price breaks the channel border upwards, the DI+ line must be above DI-. DI- must be above DI+, if downwards.

//+------------------------------------------------------------------+
//|  Declaration of enumerations of strategy types                   |
//+------------------------------------------------------------------+
enum Strategy
  {
   Donchian=0,
   Donchian_ADX,
   Donchian_MACD,
   Donchian_AvrSpeed_RSI
  };

//+------------------------------------------------------------------+
//| Declaration of enumerations of extreme types                     |
//+------------------------------------------------------------------+
enum Applied_Extrem
  {
   HIGH_LOW,
   HIGH_LOW_OPEN,
   HIGH_LOW_CLOSE,
   OPEN_HIGH_LOW,
   CLOSE_HIGH_LOW
  };

//+------------------------------------------------------------------+
//|  Enumeration for lot calculation types                           |
//+------------------------------------------------------------------+
enum MarginMode
  {
   FREEMARGIN=0,     //MM Free Margin
   BALANCE,          //MM Balance
   LOT               //Constant Lot
  };

enum   TrallMethod
  {
   b=1,     //Based on candlestick extrema
   c=2,     //Using fractals
   d=3,     //Based on the ATR indicator
   e=4,     //Based on the Parabolic indicator
   f=5,     //Based on the MA indicator
   g=6,     //% of profit
   i=7,     //Using points
  };


//--- Trailing Stop parameters

input bool                 UseTrailing=true;                            //Use of trailing stop
input bool                 VirtualTrailingStop=false;                   //Virtual trailing stop
input TrallMethod          parameters_trailing=7;                       //Trailing method

input ENUM_TIMEFRAMES      TF_Tralling=PERIOD_CURRENT;                  //Indicator timeframe

input int                  StepTrall=50;                                //Trailing step (in points)
input int                  StartTrall=100;                              //Minimum trailing profit (in points)

input int                  period_ATR=14;                               //ATR period (method #3)

input double               step_PSAR=0.02;                              //PSAR step (method #4)
input double               maximum_PSAR=0.2;                            //Maximum PSAR (method #4)

input int                  ma_period=34;                                //MA period (method #5)
input ENUM_MA_METHOD       ma_method=MODE_SMA;                          //Averaging method (method #5)
input ENUM_APPLIED_PRICE   applied_price=PRICE_CLOSE;                   //Price type (method #5)

input double               PercentProfit=50;                            //Percent of profit (method #6)

Fig.8. Donchian + ADX trading strategy on EURUSD.

//+------------------------------------------------------------------+
//| Expert Advisor input parameters                                  |
//+------------------------------------------------------------------+
sinput string              Inp_EaComment="Donchian Expert";             //EA comment
input double               Inp_Lot=0.01;                                //Basic lot
input MarginMode           Inp_MMode=LOT;                               //Money Management
input int                  Inp_MagicNum=555;                            //Magic
input int                  Inp_StopLoss=400;                            //Stop Loss (in points)
input int                  Inp_TakeProfit=600;                          //Take Profit (in points)
input int                  Inp_Deviation = 20;                          //Deviation
input ENUM_TIMEFRAMES      InpInd_Timeframe=PERIOD_M30;                 //Working timeframe
input bool                 InfoPanel=false;                             //Display of the information panel
//--- Donchian Channel System indicator parameters

input uint                 DonchianPeriod=18;                           //Channel period
input Applied_Extrem       Extremes=CLOSE_HIGH_LOW;                     //Type of extrema
//--- Selecting the strategy

input Strategy             CurStrategy=Donchian_ADX;                    //The selected strategy
//--- ADX indicator parameter

input int                  ADX_period=10;
input double               ADX_level=20;

Testing on futures showed that on the H1 timeframe, with the Donchian channel period equal to 10 and ADX period equal to 8, the results are similar to the previous strategy. Again, the best results were obtained when drawing the channel based on Close prices.

Fig.9. The Donchian + ADX trading strategy on GOLD-6.17.

//+------------------------------------------------------------------+
//| Expert Advisor input parameters                                  |
//+------------------------------------------------------------------+
sinput string              Inp_EaComment="Donchian Expert";             //EA comment
input double               Inp_Lot=0.01;                                //Basic lot
input MarginMode           Inp_MMode=LOT;                               //Money Management
input int                  Inp_MagicNum=555;                            //Magic
input int                  Inp_StopLoss=400;                            //Stop Loss (in points)
input int                  Inp_TakeProfit=600;                          //Take Profit (in points)
input int                  Inp_Deviation = 20;                          //Deviation
input ENUM_TIMEFRAMES      InpInd_Timeframe=PERIOD_H1;                  //Working timeframe
input bool                 InfoPanel=false;                             //Display of the information panel
//--- Donchian Channel System indicator parameters

input uint                 DonchianPeriod=18;                           //Channel period
input Applied_Extrem       Extremes=CLOSE_HIGH_LOW;                     //Type of extrema
//--- Selecting the strategy

input Strategy             CurStrategy=Donchian_ADX;                    //The selected strategy
//--- ADX indicator parameter

input int                  ADX_period=8;
input double               ADX_level=20;

//--- Trailing Stop parameters

input bool                 UseTrailing=true;                            //Use of trailing stop
input bool                 VirtualTrailingStop=false;                   //Virtual trailing stop
input TrallMethod          parameters_trailing=7;                       //Trailing method

input ENUM_TIMEFRAMES      TF_Tralling=PERIOD_CURRENT;                  //Indicator timeframe

input int                  StepTrall=50;                                //Trailing step (in points)
input int                  StartTrall=100;                              //Minimum trailing profit (in points)

3. The Donchian Channel and MACD trading strategy.

Figure 10. Donchian + MACD trading strategy on EURUSD.

//+------------------------------------------------------------------+
//| Expert Advisor input parameters                                  |
//+------------------------------------------------------------------+
sinput string              Inp_EaComment="Donchian Expert";             //EA comment
input double               Inp_Lot=0.01;                                //Basic lot
input MarginMode           Inp_MMode=LOT;                               //Money Management
input int                  Inp_MagicNum=555;                            //Magic
input int                  Inp_StopLoss=400;                            //Stop Loss (in points)
input int                  Inp_TakeProfit=600;                          //Take Profit (in points)
input int                  Inp_Deviation = 20;                          //Deviation
input ENUM_TIMEFRAMES      InpInd_Timeframe=PERIOD_H1;                  //Working timeframe
input bool                 InfoPanel=true;                              //Display of the information panel
//--- Donchian Channel System indicator parameters

input uint                 DonchianPeriod=16;                           //Channel period
input Applied_Extrem       Extremes=CLOSE_HIGH_LOW;                     //Type of extrema
//--- Selecting the strategy

input Strategy             CurStrategy=Donchian_MACD;                   //The selected strategy

//--- MACD indicator parameters

input int                  InpFastEMA=12;                               //Fast EMA period
input int                  InpSlowEMA=26;                               //Slow EMA period
input int                  InpSignalSMA=9;                              //Signal SMA period
input ENUM_APPLIED_PRICE   InpAppliedPrice=PRICE_CLOSE;                 //Applied price

When tested with futures, the best result was obtained with the Donchian channel period equal to 10, as in the previous strategy. A version with the trailing stop function was more efficient, than without it.

Fig.11. The Donchian + MACD trading strategy on GOLD-6.17.

//+------------------------------------------------------------------+
//| Expert Advisor input parameters                                  |
//+------------------------------------------------------------------+
sinput string              Inp_EaComment="Donchian Expert";             //EA comment
input double               Inp_Lot=0.01;                                //Basic lot
input MarginMode           Inp_MMode=LOT;                               //Money Management
input int                  Inp_MagicNum=555;                            //Magic
input int                  Inp_StopLoss=400;                            //Stop Loss (in points)
input int                  Inp_TakeProfit=600;                          //Take Profit (in points)
input int                  Inp_Deviation = 20;                          //Deviation
input ENUM_TIMEFRAMES      InpInd_Timeframe=PERIOD_M30;                 //Working timeframe
input bool                 InfoPanel=true;                              //Display of the information panel
//--- Donchian Channel System indicator parameters

input uint                 DonchianPeriod=10;                           //Channel period
input Applied_Extrem       Extremes=CLOSE_HIGH_LOW;                     //Type of extrema
//--- Selecting the strategy

input Strategy             CurStrategy=Donchian_MACD;                   //The selected strategy

//--- MACD indicator parameters

input int                  InpFastEMA=12;                               //Fast EMA period
input int                  InpSlowEMA=26;                               //Slow EMA period
input int                  InpSignalSMA=9;                              //Signal SMA period
input ENUM_APPLIED_PRICE   InpAppliedPrice=PRICE_CLOSE;                 //Applied price

Before proceeding to the next strategy with a complex filter, we should draw an intermediate conclusion based on the above strategies using classical indicators. There was not much difference between the tested strategies on EURUSD. However, the ADX and MACD filters reduced the number of market entries and increased the final result. In connection with the specifics of the futures market and its volatility, which differs much from currency pairs, filtering of Donchian signals didn't provide changes. However, the total results on futures were much better compared to the currency pair.

4. The Donchian Channel and Average Speed+X4Period_RSI_Arrows.

By optimizing the strategy of the Donchian channel combined with complex filter, we confirmed the conclusions about the strategy use in different trading conditions. Due to the low volatility of futures, the selectivity of this strategy was too high.

Fig.12. Donchian + Average Speed+X4Period_RSI_Arrows on EURUSD.

//+------------------------------------------------------------------+
//| Expert Advisor input parameters                                  |
//+------------------------------------------------------------------+
sinput string              Inp_EaComment="Donchian Expert";             //EA comment
input double               Inp_Lot=0.01;                                //Basic lot
input MarginMode           Inp_MMode=LOT;                               //Money Management
input int                  Inp_MagicNum=555;                            //Magic
input int                  Inp_StopLoss=400;                            //Stop Loss (in points)
input int                  Inp_TakeProfit=600;                          //Take Profit (in points)
input int                  Inp_Deviation = 20;                          //Deviation
input ENUM_TIMEFRAMES      InpInd_Timeframe=PERIOD_H1;                  //Working timeframe
input bool                 InfoPanel=true;                              //Display of the information panel
//--- Donchian Channel System indicator parameters

input uint                 DonchianPeriod=12;                           //Channel period
input Applied_Extrem       Extremes=CLOSE_HIGH_LOW;                     //Type of extrema
//--- Selecting the strategy

input Strategy             CurStrategy=Donchian_AvrSpeed_RSI;           //The selected strategy

//--- Average Speed indicator parameters

input int                  Inp_Bars=1;                                  //Number of bars
input ENUM_APPLIED_PRICE   Price=PRICE_CLOSE;                           //Applied price
input double               Trend_lev=2;                                 //Trend level
//--- The x4period_rsi_arrows indicator parameters

input uint                 RSIperiod1=7;                                //Period of RSI_1
input uint                 RSIperiod2=12;                               //Period of RSI_2
input uint                 RSIperiod3=18;                               //Period of RSI_3
input uint                 RSIperiod4=32;                               //Period of RSI_4
input ENUM_APPLIED_PRICE   Applied_price=PRICE_WEIGHTED;                //Applied price
input uint                 rsiUpperTrigger=62;                          //Overbought level
input uint                 rsiLowerTrigger=38;                          //Oversold level
//--- Trailing Stop parameters

input bool                 UseTrailing=false;                           //Use of trailing stop

Summary

After testing the trading system based on the Donchian channel, we made the following conclusions and notes about the strategy features:

• Trading based on the channel behaves as a classical trend following strategy, and it can be improved by using additional filters.
• Testing results were better on the futures market.
• Unlike the classical calculation of the channel borders based on Highs and Lows, the CLOSE_HIGH_LOW (close prices) showed better results. This is connected with the testing symbol — the EURUSD market is characterized with price spikes in the form of long shadows. Such spikes distort channel borders, while close prices tend to be more objective.
• Also, the best results were obtained on timeframes М30 — H1, not daily ones.
• And the effective period ranges from 10 to 20 candlesticks.