Donchian Channel Forex Strategy For Metatrader 5

The Donchian trading system was first introduced by Richard Donchian.

The system was originally based on finding the most conservative style for profiting off the markets.

The Donchian Channel Forex strategy for Metatrader 5 is tailored to be very accurate for trading the most profitable trends along with staying aside during quiet sessions.

The core of this strategy is the Donchian Channel indicator, which is known to be versatile and can be read in diverse ways.

It is important to stress that based on the strategy construct, we can adopt the 1-minute, 5-minute, 15-minute, 30-minute, hourly and even higher time frames.

Trade Setup 

MetaTrader 5 Indicators: DeMarker.ex5 (Parameters Modified; Period=28), Donchian_Channels_System.ex5 (Default Setting)

Trade Style: Scalping, day trading, swing trading

Trading Sessions: London | New York | Tokyo

Currency Pairs: Majors, cross pairs, exotics

Platform: Metatrader 5 (MT5)

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Download the Donchian Channel Forex Strategy For Metatrader 5

Buy Trade Example: AUDUSD, M30 Chart

Fig. 1.0

Trading Strategy Rules For Buy and Sell Trades Explained

Buy Entry

Enter a buy trade if the following trading conditions are met:

  1. If the Donchian_Channels_System custom indicator pops up a dodger blue candle on the activity chart as seen on Fig. 1.0, it is indicative of price breaking above the Donchian Channels resistance level, thus a signal to go long on the selected currency pair.
  2. If the light sea green line of the DeMarker Metatrader 5 indicator breaks above the 0.5 horizontal level as shown on Fig. 1.0, price is said to be pressured higher, therefore a buy alert is duly recommended.

Suggested Stop Loss for Buy Entry: Place stop loss 3 pips below short-term support.

Suggested Exit Strategy/Take Profit for Buy Trade

Exit the buy trade if the following trading conditions are met:

  1. If the Donchian_Channels_System custom indicator pops up a deep pink price bar on the activity chart while a bullish trend is running, a bearish reversal is said to be kicking in, as such an exit or take profit will suffice.
  2. If the light sea green line of the DeMarker forex indicator dips below the 0.5 reference level as depicted on Fig. 1.0, the current market trend is said to be altering, therefore an exit or take profit will do.

Sell Entry

Open a sell trade if the following trading conditions are met:

  1. If the Donchian_Channels_System custom indicator pops up a deep pink candle on the activity chart as illustrated on Fig. 1.1, price is said to dip below the Donchian Channels support level, therefore it is a trigger to go short on the designated currency pair.
  2. If the light sea green line of the DeMarker indicator dips below the 0.5 horizontal level as exemplified on Fig. 1.1, price is said to be dragged lower i.e. a trigger to sell forthwith.

Suggested Stop Loss for Sell Entry: Place stop loss above short-term resistance.

Suggested Exit Strategy/Take Profit for Sell Entry

Exit the sell trade if the following trading conditions are met:

  1. If the Donchian_Channels_System custom indicator displays a dodger blue price bar on the activity chart during a bearish trend, a bullish reversal is said to be imminent, as such an exit or take profit stance is advised.
  2. If the light sea green line of the DeMarker forex indicator surgesabove the 0.5 reference level as illustrated on Fig. 1.1, bears power is said to be diminishing, therefore an exit or take profit stand is recommended.

Sell Trade Example: AUDUSD, M30 Chart

Fig. 1.1

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Download the Donchian Channel Forex Strategy For Metatrader 5

MT5 Trading Indicators Used For This Strategy

The DeMarker indicator is an oscillator designed by Tom Demark that also finds use when traders are trying to determine potential overbought and oversold regions in the market.

The Donchian_Channels_System is a modified version of the original Donchian Channels indicator.

As a volatility based indicator, the Donchian Channels System indicator includes the implementation of a breakthrough system using the original version of the indicator.

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