Share your knowledge on Donchian Channels

Is there someone who can shed some light on DONCHAIN CHANNEL
It's a BREAKOUT strategy and used by some seniors like those at DailyFX
I particularly don't know too much about breakouts and as such there are many fake breaks
but this strategy has the following

1. It is said like majority of Trading Indicators, this is better if used for higher time frames like 1HR and above even better
2. Its a trend following tool, following current trend is very vital
3. must check that that both the Market and that pair must be in a volatile situation like 40%+
this can be checked at the DailyFX site
4. Any Pair can be traded
5. the bad thing is and Iam not sure if this is the case, it is said that the STOP LOSS must be placed on one of the channel lines and sometimes they are very apart like 300 pips!!!

If there is anyone that trades this indicator, please share your knowledge on this and most importantly

1. What is your Entry
2. And your Exit
3. When not to follow it

Below is the MT4 indicator which i have

http://help.geckosoftware.com/40manu...n/pict_don.gif http://support.motivewave.com/wp-con...an-Channel.png

With Donchian Channel you are always in the market either long or short.

Long Position
1. Key-in position when price is about 30% (or whichever you are comfortable with) from upper band
2. Entry: Upper Band Price + [spread]
3. SL: Lower Band Price - [spread]
4. Once in position, SL should move with lower band price

Short Position
1. Key-in position when price is about 30% (or whichever you are comfortable with) from lower band
2. Entry: Lower Band Price - [spread]
3. SL: Upper Band Price + [spread]
4. Once in position, SL should move with upper band price

When using classic donchian channel, range of SL is huge. This is the reason why most retail forex traders do not use dc.

There's a variation of the strategy using a shorter-period channel for the trailing stop. For example, if the main channel is 30-period one, you can use 20 or 10-period for the stop. This provides tighter stops and loses less of the unrealized profit at the end of the trend. Of course, it also gets more early stops. It's give and take.

Thanks guys
I forgot to mention that the settings from DFX was 50 and not the usual 20
If this is not used too much, why was those guys teaching it in one of their lesson tutorials
even though i have yet to figure this out, if our stop loss will be more than several hundred pips away and that we risk a small percentage, then this strategy would use the account equity during our intraday trading and even if we bring our SL down with the channel
will we hit our target or achieve 2:1

What I would like to highlight is also, DC is has a success of typical 20-30%, it means out of 10 trades, you'll lose 7-8 trade, winning only 2-3 trade. But this 2-3 trade win will offset the losing trade and provide you a net profit. If you can take the 7-8 trade of losses psychology before a winning trade, you'll should be able to trade DC. And this is also one of the reason why the uptake of this strategy among retail investor (I'm guess especially beginners??) is far less. On top of that, there will be losing years.

As far as I know Donchian channel was, like many indicators, intended to be used on Daily charts.
20 day highs and lows being the mainstay of the Turtle traders.
As Victoryong has already pointed out, the success rate is not that great, but a break-out in a strong trend and adding to the winning position as the trend extends can give massive profits that wipe out the previous losses.
Of course, this doesn't suit the majority of retail traders, who want to see a quick profit.
Richard Dennis of Turtles fame would suffer losses for months on end and recoup those losses and a lot more with a single trade.
Of course he wasn't infallible and suffered extremely large drawdowns that his investors were not prepared to accept.
Still, he made millions from a very small starting stake.
Unless you are prepared to accept large drawdowns and stay in trades for the long term, do not trade donchian channels. Too often the break-out happens to be a fakey at support or resistance, with no follow through.

http://www.metastocktools.com/downloads/turtlerules.pdf

Nobody said u to use another side as an exit/stop-loss, u can use trailing volatility stop.

20 Days period for entry might be not a best choice for entry,remember turtles used 55 days too.

U dont have mid line on your charts, it can work a bit like chandler stop too