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How to Trade with Donchian Channel Indicator

Quick Summary of Donchian Channel Indicator:

  • Trading Techniques : The Donchian channel indicator consists of an envelope with upper and lower bands and a middle band.
  • The DCI is a pointer utilized in market exchanging created by Richard Donchian.
  • The indicator plots a 20-period default high and low price band with the middle band showing the average of the two.
  • The DCI is ideal to represent trends and also ranging markets
  • The Donchian channels’ high and low bands are a great way to identify support and resistance levels.
  • When the bands are straight, that price level is often stronger as a support or a resistance level

How to Trade with Donchian Channel Indicator

  • Sell the break out when the price falls below the 20-period low
  • Buy the break out when the price rises above the 20-day high.
  • Traders can take a long position, if the stock is trading higher than the Donchian channels “n” period and
  • book their profits/short the stock if it is trading below the DC channels “n” period.
  • Combining Donchian Channel trading strategies with other trading strategies might decrease the false entry/exit signals and give a clearer picture on trading opportunities.
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About Dwipen Gogoi

Dwipen Gogoi, MBA (IB and IT) and PGDFT from Pune. (Technical Analyst of AliceBlue) I am a You Tuber, Blogger and doing Technical Analysis last 10 years in Stock, Commodity and Forex Market. i am creating various trading strategies for day traders, swing traders, scalp traders.

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