DONCHIAN CHANNEL INDICATOR MT4
- Donchian channel MT4 indicator. Best for breakout trading. Provides forex trend direction entry, exit and retracement trading opportunities.
The Donchian Channel Indicator is a trend following MT4 indicator. Traders mainly use it to identify the beginning of a new trend direction and trading breakout and trend following strategies.
- The indicator not only provides the best entry points but also provides additional re-entry points during pullbacks. The channel width increases during volatile markets and reduces in a low volatile trading environment. As a result, traders use the Donchian Channel Indicator to measure the market volatility.
The indicator forms an integral part of many trend-based forex trading EA as traders can automate it easily. Traders can apply the indicator to any time frame and is suitable for all kinds of trading, including swing trading and scalping.
Donchian Channel MT4 Indicator Trading Method
- The above EURUSD M30 chart shows the Donchian Channel Indicator for MT4 in action. The channel is drawn based on the low and high prices during the defined period in indicator settings. The inclination of the channel corresponds to the direction of the market trend. Obviously, the channel moves sideways during a sideways market. Thus the Donchian channel indicator provides the direction of the trend.
If the price breaks the upper band, the indicator provides a BUY signal. At the same time, stops are placed at the lower channel with a take profit corresponding to the next signal or based on a risk-reward ratio of the trade. Oppositely a SELL signal is generated when the price breaks the lower channel. A price retracement provides the forex traders with an additional entry point.
New traders will benefit from the indicator to identify the beginning of a new trend and to enter the markets at the early stages of a trend. However, advanced traders can use the indicator to look for retracements to add multiple positions during a trending market and increase the returns.
An effective method of trend trading involves trading using multiple time frames. Donchian Channel Indicator for MT4 provides exceptional results while trading with a multi-timeframe approach. Since the higher time frame charts display the trends clearly, forex traders use these time frames to identify the primary trend direction. However, a smaller time frame chart can determine the best entry and exit points within the major trend and ride them safely.
Conclusion
- The Donchian Channel Indicator for MT4 is an excellent tool for trend trading and breakout trading. However, since every currency pair behaves differently to various market conditions and the fact is past 20 periods is not always a true reflection of the trend. So forex traders can combine the indicator with other tools and indicators to confirm the signals.
