The Donchian channel is an indicator used in market trading developed by Richard Donchian It is formed by taking the highest high and the lowest low of the last n periods. The area between the high and the low is the channel for the period chosen.
A line is marked for the high and low values visually demonstrating the channel on the markets price. This indicator also includes a mid line and a moving average of the mid line.
The Donchian channel is a useful indicator for seeing the volatility of a market price. If a price is stable the Donchian channel will be relatively narrow. If the price fluctuates a lot the Donchian channel will be wider. Its primary use, however, is for providing signals for long and short positions.
If a security trades above its highest n periods high, then a long is established. If it trades below its lowest n periods low, then a short is established.
Buffers Used In Indicator
This indicator uses four buffers representing;
Upper Donchian Channel – Buffer 0 – Green Line
Middle Donchian Channel – Buffer 1 – Blue Line
Lower Donchian Channel – Buffer 2 – Green Line
MA Donchian Channel – Buffer 3 – Red Line
The Code
The code is fairly straightforward, it gets the High and Low for the last ‘n’ periods in InpBarsToLookBack. It then takes an average of the High and Low values to create the Middle Line of the Channel. The iMAOnArray function is then used to get a moving average of the Middle Donchian Channel based upon parameters InpMaPeriod and InpMaMethod that have been inputted.
