Donchian Channels

Podcast Duration: 05:38

Jab main school mein tha there were very strict rules about where we were to wear the waistband of our school trousers. Headmaster Ji ne toh prefect bhi select kiya tha. The prefect used to stand at the gates and make sure we wore our trousers at the stipulated location. Most of us adhered. But then there was Sankalp, the stylish dude. School is here. He works at a fashion house today and sells 50,000-rupee three-piece-suits for men. Over the years we spent together in school, uska 3 waistband level dekha maine. When high waists were a big thing, he wore his trousers higher than anyone else. When low waists were the big trend, he wore his trousers lower than anyone else and when the relaxed mid waist was seen on men on TV, his waistband stood firmly at his mid waist.

Donchian channels se mujhe Sankalp ki yaad aa jaati hai. Jaise Sankalp ke 3 waistband levels the, ussi tarah donchian channels are formed by a collection of three bands, each placed at a different level on a given stock graph. The upper level, or more precisely the upper band, is drawn at the level of highest price among all recent prices during a period chosen by the trader. The lower band is drawn at the lowest price among all recent prices during the same period. The middle band is the difference between the upper band and the lower channel, divided by 2. That is upper band value, minus lower band value, divided by 2.

Yeh sab sun ke aapko samajh mein already aaya hoga ki plotting Donchian Channels on a stock graph is a five step process.

Chaliye step by step chalte hain:

Step 1: Choose a period. Apne hisaab se choose karo: a day, a week, a month, a year and so on.

Step 2: Map the highest prices of the stock in question during the given period. Agar aapne 1 day ka period chose kiya hai toh aap har minute ya har hour ke highest price choose karoge. Agar aapne 1 month choose kiya hai, toh you need to look at the high price and low price at every day of the chosen month.

For convenience, in the course of today's podcast we are going to assume that our chosen period is a fortnight yaani ke 2 weeks. We will therefore look at the highs and lows of all the days in this period.

Step three: Look for the highest price on each day and use this to plot your upper line.

Step four: ussi tarah Identify the lowest price on each day and use this to plot your lower line.

Note that step three and step four are interchangeable. Chahe toh plot the lower line pehle and upper line uske baad. No issue.

Step five: Do a quick calculation: subtract the value of the lower band from the value of the upper band, for each day, to map the middle band.

Kai saare traders sirf upper aur lower prediction band ka istemal karte hai. Toh traders Donchian Channels kis cheez ke liye use kiya jaata hai?

Traders are looking for the stock price to break out - that is move over the upper Donchian Channel line or below the lower Donchian Channel band. Traders ko price breakouts ke liye rukna chahiye, in order to decide whether they should take long positions or short positions.

Jab stock price below the upper Donchian Channel band chala jaata hai, they will usually choose to short their trades. Inki soch hai ki to sell their shares now at a decent stock price, phir buy the stock back when the stock price falls even lower and then sell it over again when the price rises once again.

Jab stock price above the lower Donchian Channel band chale jata hai, traders usually choose to trade long. Inke logic ke hisaab se ab stock prices thoda kam hai lekin they have begun on their predicted upswing - traders buy now with the hope of selling later at a higher price.

Stock price volatility ka be information Donchian Channels se mil jaata hai. Since the upper band tracks high prices and the lower band tracks low prices, the width of the channel can depict how widely prices were fluctuating during a given period. Mota channel ka matlab hai higher volatility; patla channel la matlab - less volatility.

Donchian Channels jada popular hai kyuki inhe samajhna aasaan hai. Even a beginner trader can read and understand the data that they display. Donchian Channels were invented by a futures trader called Richard Donchian. Unhone apne stock price predictions ke liye Donchian Channels invent kiye tha aur woh khud iska use frequently kiya karte the. He went on to earn the title "the father of trend following" so it is safe to say that as a tool, it is endorsed by the very best.

Dusre indicators ke jaise hi, Donchian Channels are an excellent tool to make informed predictions and informed decisions on upcoming trades. However, they must be used with due consideration.

Remember that Donchian Channels are using historical pricing data, current price nahi use kiya jata hai. Be sure to actually witness a price change in the predicted direction before trading on your prediction.

Donchian Channels cannot tell you anything about overbought and oversold conditions, because they do not take volume into account. Like all its counterparts, Donchian channels too should be used in conjunction with other technical indicators.

Ab aap aasani se price prediction ke liye Donchian Channels ka istemal kar sakte ho. Lekin yaad rakna - the stock market is highly unpredictable. Consider your risk appetite before investing.

Doston, that’s all we had in today’s podcast, lekin why let the learning stop? Check out our other podcasts, or learn more about markets on our website

Tab tak ke liye, alvida. See you in the next podcast!