Understanding the Basic idea of Donchian Channels to use as a Trading Strategy

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Assalam-o-Alaikum Steemians !

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I'm @moneyster, a professional level Cryptocurrency investor and an analyzer. As usual, today I thought to share another Crypto-related experience with you. I hope this article will be considerably beneficial for all the Steemians in this community

What are these Donchian Channels ?

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Donchian Channels are popular Trading related concepts consisting of Basic 3 lines Upper Band, Mid Band, and Lower Band. At the same time, this mid-band is also known as the Median band and it plays a significant contribution to the entire indicator.

This indicator is quite similar to the Bollinger Bands indicator in its appearance. But it really works in a different concept as compared to the Bollinger Bands. Especially, here we have the ability to find the Resistance and support at the time when we place the order.

Because here the Upper Band, Mid Band, and Lower Band always work as Parallel lines with the price movement. Therefore, these bands don't volatile for such small movements in the chart as compared to Bollinger Band.

Basically, the Mid Band always works like the average value for the relevant price movement within the Upper and Lower Bands. Sometimes, the price level can be bounced from the Mid Band as it works as simple support or resistance level. At the same time, Upper and Lower bands can be worked as strong support or resistance zones.

When the price Breaks the Upper or Lower Band, we can easily determine a strong price movement as compared to the normal movement which worked within the Band. However, the Donchian Channel indicator also changes its Parallel line according to the Trend of the price level. Then, it will create new Support or Resistance lines within the Price chart.

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What are the benefits of using the Donchian Channels as a Trading Strategy?

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Donchian Channel helps us to determine the basic idea of the relevant Market. With the help of these Donchian Channels, we can easily take a scalp entry for a long or short order. The most interesting thing here is that we can use these Donchian Channels for placing our Stop Loss and Targets by using the same Donchian Channels indicator. Especially, here we can understand the entire price movement whether it is bullish or bearish. As the Bottom line has been generated considering the relevant average past bearish movements, it works as a strong support zone for the price level. At the same time, as the Upper line has generated considering the relevant average past bullish movements, it works as a strong resistance zone for the price level. Therefore, we can easily collaborate with these generated Donchian Channels to predict the future market behavior at a certain level.

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How to analyze our Crypto Charts Practically with the help of Donchian Channels Indicator?

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First of all, I will add this Donchian Channels indicator to my Crypto Chart using the TradingView platform. Then we can go to "Indicators" through the tool panels and search "Donchian Channels" in the giver search bar. Below I have included a screenshot to demonstrate adding the Donchian Channels Indicator to our chart.

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Now I have demonstrated some good zones provided by this Donchian Channels Indicator. Here we can see good zones to buy our assets or take a buy entry after confirming the entry from the Donchian Channels Bottom Line. Here we can clearly see the price level has reached the Donchian Channels Bottom Line. When the price level touches the Donchian Channels Bottom Line like this, we can consider it as a good support zone as the price has already bounced from this region in the past price data.

_{Screenshot Source - www.tradingview.com^Location}

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Below I have demonstrated another good zone provided by this Donchian Channels Indicator. Here we can see good zones to sell our assets or take a sell entry after confirming the entry from the Donchian Channels Upper Line. Here we can clearly see the price level has reached the Donchian Channels Upper Line. When the price level touches the Donchian Channels Upper Line like this, we can consider it as a good resistance zone as the price has already been rejected from this region in the past price data.

_{Screenshot Source - www.tradingview.com^Location}

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In this way, we can use these Donchian Channels Indicators for getting better and easy trading opportunities. However, as always we can try to combine this strategy with some other indicators to increase the winning percentage.

At the same time, as I said in my previous article, we should remember that all the indicators and strategies are not efficient completely as nothing we can find 100% efficient in the world. So, we should depend only on these strategies and indicators to confirm our trading opportunities.

I have studied the below-sourced articles to further study these topics and I have explained all the above facts in my own words and experience.

• Source 1

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Thank you all....!