The concept of the indicator is by Richard Davoud Donchian.
The explanation at http://en.wikipedia.org/wiki/Donchian_channel essentially states the following.
“It is formed by taking the highest high of the daily maxima and the lowest low of the daily minima of the last n days, then marking the area between those values on a chart.
The Donchian channel is a useful indicator for seeing the volatility of a market price. If a price is stable the Donchian channel will be relatively narrow. If the price fluctuates a lot the Donchian channel will be wider. Its primary use, however, is for providing signals for long and short positions. If a security trades above its highest n day high, then a long is established. If it trades below its lowest n day low, then a short is established.”
The upper line shows the highest high of x bars.
The lower line shows the lowest low of x bars.
Bearing this in mind, one can see that there is great scope for working between these two extremes to find intraday trading levels or even longer term. An interesting effect is also to use the longer periods but adjust the range displayed as a larger or smaller percentage of it.
A picture is worth a thousand words and the charts attached will give you an idea of what I mean.
The Brooky Fibbed Donchian indicator
The Brooky indicator allows you to tailor display the High Low information in any way that supports your strategy. If you prefer not to add pivots, Fibonacci, Murray lines or such and just want some realist self drawing levels, then these may be what you are looking for. The advantage I find with these levels is that they are easy to visually backtest and will run well within the Mt4 strategy backtester.
The indi as supplied was set for the M15 timeframe but all the options can be changed to suit your tf.
Right Click and save Indicator.
[shaagi-button name=”Free Donchian”]
Unzip and put into /experts/indicators folder as per normal for Mt4
INDICATOR >>> Brooky Fibbed Donchian Indicator