Donchian Channels Technical Indicator

In this article, we will be discussing the Donchian Channels indicator which is a banded technical indicator like Bollinger Bands.  

I will first provide

  1. A brief introduction to the theory or concept behind Donchian Channels and how trading signals (buy or sell) are determined using this indicator.
  2. A demo of the template and how you can use it to calculate Donchian Channels and trading signals for any stock you are interested in.
Donchian Channels Technical Indicator in Excel

Concept / Theory

The Donchian Channels (DC) indicator was created by the Richard Donchian who is known as The Father of Trend Following.

Donchian channels is a measure of volatility of the stock price. As this is a banded indicator, there is an upper line and lower line that serve as the boundaries of the channel. A middle channel line is also displayed.

Donchian Channels Calculation

Only input parameter for this indicator is the Length which defines the number of periods to look in history. A 20-day period is the most used and here is how the three channel lines are calculated for each day.

  • Upper Channel = 20 Day High price
    • Highest High price for the past 20 days including today
  • Lower Channel = 20 Day Low price
    • Lowest Low price for the past 20 days including today
  • Middle Channel = (20 Day High Price + 20 Day Low Price)/2
How Donchian Channels indicator is calculated

Signals

A potential trading signal strategy using the Donchian Channels is listed below.

There is no golden rule or a rule that works all the time. Otherwise, everyone will use that rule and make a lot of money easily. 😊

  1. If the High price moves touches the Upper channel Line, then a Buy signal is generated.
  2. If the Low price moves touches the Lower Channel line, then a Sell signal is generated.

Excel Template

The template will help you create the Donchian Channels automatically and also calculate the trading signals instantly for any stock.

Donchian Channels trading signals

Download

Video Demo

How to refresh data?

How to refresh Stocks data
How to refresh Stocks data

Requirements:

To pull live Stock data from the services you would need either Microsoft 365 Subscription Plans for PC and Web or Excel for the web

How to Use:

Type in a stock sticker symbol on the top left.

Donchian-Channels-Indicator-Sample-in-Excel
Donchian-Channels-Indicator-Sample-in-Excel

If Excel does not recognize your stock symbol, it will pop up this data selector box.

Select the Stock

You can select the stock you are interested in.

Period

The template can pull up to 5 years of price history by default. You can choose how much history to display on the chart easily using the slicer buttons.

Period-for-the-Stock-price-history
Period-for-the-Stock-price-history

The options are 5 Days, Month Till Date, 1 Month, 3 Months, 6 Months, Year Till Date, 1 Year, 5 Years.

Interval

The template allows price history at 3 different intervals.

Interval-of-Stock-price-history
Interval-of-Stock-price-history

Daily/Weekly/Monthly are the options.

Input Parameter – Length

Donchian Channels input parameter

Length: You can type in a length in periods. For example, in the above screenshot, we have entered 20 periods.

The chart will update automatically based on all the above inputs.

Signals

The template shows the buy and sell signals on the chart.

Donchian-Channels-Indicator-with-Signals
Donchian-Channels-Indicator-with-Signals

In addition, if the latest day has a Buy or Sell signal, it is displayed on the top next to the current price.

Price-and-Latest-Signal Buy
Price and Latest Signal – Buy
Sell-Signal
Sell-Signal

Timezone

On the top right you can see the maximum of the last trade time of these currencies.

The default time that Microsoft provides is UTC.  The offset is set to -7 hrs, to convert to pacific time zone.

You can modify this if you need the time in a different time zone.

Visit https://savvytime.com/converter/utc to view offset.

Resources

About Donchian Channels – TradingView

For more Excel Templates for Stock Market, visit indzara.com/stock-market-templates

Feedback

Please share your feedback on this template in the Comments below. If you find this useful, please share with your friends who may benefit from this content.

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