Donchian Bands calculate support and resistance levels based on high/low price of x periods.
They are a great tool for trading breakouts in the forex market.
Donchian Bands use a very simple formula to draw the upper and lower band.
Upper Donchian Band: High price of x periods.
Lower Donchian Band: Low price of x periods.
BUY: Price breaks and closes above the 20-period upper Donchian Band.
SELL: Price breaks and closes below the 20-period lower Donchian Band.
See illustration below for clarification of the entry rules.
EUR/USD 1 Hour Chart Example
How to install the Donchian Bands custom indicator in Metatrader 4?
- Download the Donchian Bands.mq4 indicator to your computer.
- Open your Metatrader 4 platform.
- Open the data folder from the top menu.
- Open the MQL4 folder.
- Open the indicators folder.
- Paste the indicator file in this folder.
- Restart the trading platform.
- Open any trading chart.
- Attach the indicator to the chart.