Discussion of article "How to create a custom Donchian Channel indicator using MQL5"


New article How to create a custom Donchian Channel indicator using MQL5 has been published:

There are many technical tools that can be used to visualize a channel surrounding prices, One of these tools is the Donchian Channel indicator. In this article, we will learn how to create the Donchian Channel indicator and how we can trade it as a custom indicator using EA.

In this part, we will identify the Donchian Channel indicator and understand the main concept behind it to use effectively. The Donchian Channel was developed by the Richard Donchian trader and the main objective is to identify the trend this means that it is a trend-following and lagging indicator also as it follows trend directions and price movements. It consists of three lines forming a channel that contains the price. the upper line of the channel represents the highest price recorded during a specific time, the lower line of the channel represents the lowest price of a specific period of time, and the middle line represents the half distance between the upper and lower lines.

The following chart is an example of the Donchian Channel chart:

indicator example

As we can see in the previous chart that there is a line above prices, another one below it, and there is a third one between them. What makes the indicator contains or surrounds prices by upper and lower lines in addition to another middle line that can be useful also. Based on this form of the indicator can be useful in trading by using it based on different strategies trend identification, breakouts, and support and resistances levels identification for example.

The main concept of using this indicator is to observe the highs and lows of prices across a specific time to identify trends or the direction that we can be biased for. If the price is above the highest high of a specific time, this indicates that there is a bullish power and this may be a buy signal. If the price is below the lowest low of a specific time, this indicates that there is a bearish power and it may be a sell signal. So, once we specified a specific period of time and determined the highest and the lowest prices, then we will observe them until the prices move in a specific direction up or down and the signal here is breaking the determined highest high or lowest low.

Author: Mohamed Abdelmaaboud