Donchian channel is constructed by taking the highest (maximum from High) and the lowest (minimum from Low) prices for the previous period followed by marking the chart area between them.

Donchian recommended to use this indicator for daily timeframes with the interval period=20. However, other authors suggest increasing the interval.

Trading strategy

The instrument will be bought (long positions will be opened) when the current price maximum increases the maximum channel value and it will be sold (short positions will be opened) when the current bar decreases below the minimum channel value.

Additional modes of application

Donchian channel is a useful indicator for observing market price volatility. If the price is stable, Donchian channel will be relatively tight. If the price fluctuates too much, then Donchian channel will be wider.