Strategy #0000000022 · Trend and time-series momentum
Donchian channel breakout
Build a rolling high/low range, then choose reversal or breakout before the move.
A Donchian upper/lower band is the highest/lowest price over the prior T periods. A touch can be faded, or a close outside the range can signal a trend breakout.
Use completed prior bars; breakout and channel-reversal rules are distinct.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
Jack uses only completed prices to define today’s channel
Jack sets a 20-day channel from the previous 20 completed sessions, excluding today’s unfinished bar. If price closes above the upper band, his breakout rule goes long; below the lower band, it goes short.
Rose notes that another trader may short a touch of the upper band and expect a reversal. These are different strategies. Jack also fixes stops, trailing exits, holding time, always-in-market rules and how gaps are filled.
A narrow range can precede continuation or a failed break. Testing hundreds of windows and confirmation rules requires data-snooping correction and a genuinely held-out sample.
- 收盤 > 前 T 期高點A breakout rule takes a long signal when the close exceeds the previous T-period high; a reversal rule would differ.
- 收盤在通道內Inside the channel, the rule may stay flat or retain the prior position according to its specification.
- 收盤 < 前 T 期低點A close below the previous T-period low is a short breakout signal, subject to instrument and borrow constraints.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
Use the highest high and lowest low strictly before the current period to avoid leaking the current bar into the breakout threshold.
U/D are channel bands from completed bars before t; C is the current close. Fix T, price field, confirmation days, execution time and exit rules.
Greeks: the directional intuition
- Lookback T
- Measures sensitivity to implied volatility.
- Breakout vs reversal
- Measures sensitivity to implied volatility.
- Gap risk
- Measures sensitivity to implied volatility.
- Data snooping
- Measures sensitivity to implied volatility.
Use the highest high and lowest low strictly before the current period to avoid leaking the current bar into the breakout threshold.
Practical context · published observations
Donchian breakout: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
不是歷史 OHLCV 重播或回測。實際結果需延後到下一可交易價格、計入停損、股息、展期和成交摩擦。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Channel rules change the range, confirmation and exit.
Reversal-style CHL, Donchian breakout and STW channel families create different positions.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Classic Donchian breakout | Rolling high/low break | Follows a close beyond the prior T-period high or low. | Longer windows lag; shorter windows create more false breaks. |
| Channel-edge reversal | Range reversion | Fades the upper band and buys the lower band. | A continuing trend can quickly deepen a counter-trend loss. |
| STW trading-range break | Parameterised rule family | Varies window, band, local extrema, confirmation and holding period. | The large rule family requires data-snooping controls. |
| CHL outside channel | Always-in-market reversal | Maintains direction based on close relative to the channel. | Range conditions and reversals are continuously exposed. |
| ATR-width channel | Volatility-scaled range | Uses ATR to set channel width or a breakout buffer. | ATR lags jumps and tuning can overfit. |
| LSO / MII channel rules | Alternative range anchors | Uses consecutive price ranges or theoretical first-day extrema for exits and position maintenance. | Each original rule needs exact reconstruction; similar names do not imply the same signal. |
Exclude the unfinished current bar. Parameter searches, gaps and stop fills materially affect results.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.
- 01Donchian (1960), High Finance in Copper.research
- 02Sullivan, Timmermann & White (1999), Data-Snooping, Technical Trading Rule Performance, and the Bootstrap.research
- 03Park & Irwin (2005), Profitability of Technical Trading Rules in US Futures Markets.research
- 04Kakushadze & Serur (2018), 151 Trading Strategies, §3.15.source