Donchian breakout
A rules-first breakout framework based on new lookback extremes.
Use the one-page practice checklist
Keep the exact settings, long and short triggers, stop, no-trade filters and management rule beside the chart while you replay this method.
Worked example for demo practice, not a live trade signal.Keep the chart simple
What needs to be in place first
- Use a fixed entry lookback
- Size from current volatility
- Take both directions unless the filter is predeclared
See donchian breakout from both sides
Choose a direction and follow the chart from setup to entry, stop and planned exit. The method stays the same; only the directional comparisons reverse.
Entry is above the trigger, invalidation is below the setup and a profit exit is above the entry.
- EEntryLONG ENTRY — next H4 open
- SStop / risk limitSTOP — 2 × ATR(20)
- XExitEXIT — 10-bar channel
This synthetic H4 example shows the canonical 20-bar entry channel, Wilder ATR(20) risk, a 2 ATR initial stop and the later rule-based 10-bar exit. Earlier warm-up bars are summarised by the channel lines.
NO TRADE when channel width is below 2 ATR, portfolio heat would exceed 1.50%, or the next-open gap is greater than 1 ATR(20).Check the market first
The 20-bar channel width must be at least 2.0 × ATR(20).
Wait for the entry rule
Enter at the next H4 open after a completed close above the prior 20-bar upper channel for a long or below the lower channel for a short.
Place the stop before entry
Initial stop is 2.0 × ATR(20) from the actual fill. Size to risk 0.50% of equity, rounded down to 0.01 lot; never add to or widen the position.
Know how the trade ends
Exit at the next H4 open after a completed close through the opposite 10-bar channel. The initial 2 ATR stop remains active until that exit.
Worked example: 20-bar Donchian close breakout
This version of Donchian breakout chooses one answer for every decision so you can repeat it. Treat the settings as a starting point to test, not as proven or recommended parameters.
EUR/USD, GBP/USD, USD/JPY and AUD/USD; H4 UTC candles; both directions.
Signals are computed from completed bars only and the current signal bar is excluded from the 20-bar channel.
One position per pair; no pyramiding in this canonical demo.
Plot a Donchian upper/lower channel from the highest high and lowest low of the preceding 20 completed H4 bars, excluding the current bar.
Plot a separate 10-bar opposite-side exit channel, also excluding the current bar, and Wilder ATR(20).
Load at least 60 bars before the first signal and mark the channel values before revealing the signal close.
Give every tool one job
Direction, timing, volatility and risk are different questions. This stack assigns them rather than asking one indicator to do everything.
Defines the objective entry extreme from information available before the signal bar.
Supplies the single opposite-channel exit; it is not adjusted after a losing run.
Normalises initial risk and the gap filter across pairs.
- The 20-bar channel width must be at least 2.0 × ATR(20).
- No position may already be open in the pair and aggregate demo risk across all breakout positions must remain at or below 1.50% of equity.
- Both long and short breaks are eligible; there is no discretionary trend filter.
Enter at the next H4 open after a completed close above the prior 20-bar upper channel for a long or below the lower channel for a short.
Initial stop is 2.0 × ATR(20) from the actual fill. Size to risk 0.50% of equity, rounded down to 0.01 lot; never add to or widen the position.
Exit at the next H4 open after a completed close through the opposite 10-bar channel. The initial 2 ATR stop remains active until that exit.
Cancel if the next-open gap exceeds 1.0 × ATR(20), channel history is incomplete, or the portfolio-risk cap would be breached.
Use a constant 1.2-pip spread, 0.2-pip adverse slippage on both entry and exit, zero commission, and a frozen 0.5-pip cost per daily rollover.
Move through the chart one decision at a time
- Bar −3: freeze channel
The preceding 20-bar EUR/USD H4 upper channel is 1.0920, lower is 1.0780 and ATR(20) is 0.0055; width 140 pips exceeds 2 ATR, so the regime qualifies.
- Bar −2: no signal
The high trades through 1.0920 but closes at 1.0916. A wick is not a close breakout, so no order is recorded.
- Bar −1: signal
The next completed bar closes at 1.0927. The channel still excludes that bar, making the close a valid long signal.
- Bar 0: enter
The next bar opens at 1.0929 and simulated adverse slippage is added. The initial stop is exactly 2 × 0.0055 below the fill.
- Bars +1 to +12: update exit only
Each close recomputes the trailing 10-bar lower channel from earlier bars. No target, discretionary breakeven move or add-on is permitted.
- Bar +13: exit
A completed close falls below the then-known 10-bar lower channel; exit at bar +14 open, apply costs and record net R.
A rejected example
Reject a close breakout when the next H4 bar gaps 1.2 ATR beyond the signal close; the method cancels rather than pretending the channel price was available.
Common variations
- Separate variant only: 55-bar entry and 20-bar exit.
- Separate variant only: stop-entry at the channel rather than next-open entry.
- Separate variant only: pyramiding at fixed 0.5 ATR intervals with a hard portfolio-heat cap.
Rebuild this method on the platform you use
The written rules work independently of the charting app. Match the same feed, timeframe, indicator settings and completed-candle timing before comparing results.
MT4
Manual rulesThe rules can be followed manually, but one or more requested chart tools need custom code on this platform.
MT5
Manual rulesThe rules can be followed manually, but one or more requested chart tools need custom code on this platform.
TradingView
Manual rulesThe written rules can be followed manually. WickAtlas does not currently provide an automated strategy or trading bot.
TradingView indicatorsWickAtlas TradingView guideTest on a demo account first. Platform access does not validate a strategy or make a result likely. Compare the platforms.
Keep every test organised.
The CSV gives you one place to record the setup, costs, execution, outcome and whether you followed your rules.
Download test-plan CSV ↓