The highest high and lowest low of the past N bars, drawn straight. No smoothing, no statistics — the oldest and simplest trend-following envelope, and the one the Turtles famously traded.
Donchian Channels were introduced in the 1950s by Richard Donchian, a commodities trader regarded by many as the grandfather of trend-following. What the indicator does is almost embarrassingly simple: draw a line at the highest high of the past N bars and another at the lowest low. That is the whole construction.
A midline — the average of the two — is sometimes added. But nothing is smoothed. There is no standard deviation, no ATR, no exponential weight. The indicator displays the raw extremes of recent price, unfiltered.
The simplicity is the point, not a limitation. In the 1980s, when Richard Dennis and Bill Eckhardt trained the "Turtles" — a group of complete novices who went on to manage enormous capital — the core rule was: buy when price closes above the 20-day high; sell when it closes below the 20-day low. That is Donchian Channel(20) breakout trading. The episode stands as one of the cleanest historical proofs that a disciplined simple system, executed without discretion, can produce extraordinary returns in trend-following markets.
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