From my own point of view donchain channel is an indicator that's used to plot the highest high price and the lowest high price it has a current price momentum for decision making like when to enter and exit the market it could also be seen in most trading platform.
There are two ways that are being used on a donchain channel which are the bullish trend and bearish trend and traders uses the middle line to separate the two approaches.
The candle sticks helps to indicate the full trading psychology among buyers and sellers based on it's body and wick.the downtrend candle stick indicates the bearish trend while the uptrend indicates the bullish trend.
HOW DONCHAIN CHANNEL IS BEEN CALCULATED.
Actually in the donchain channel the upper band is calculated as the highest price reached in the prior period.and the lower is calculated as the lowest price reached in the prior period.
This calculation has a formula which is
UC=Highest high in last Hour
Middle channel=(CUC+1)
LC=lowest low in last N
Where
UC=Upper channel
N=Number of minutes or hours.
Period=Minutes or hours
LC=Lowest channel.
The upper band shows the price in perior n period
The lower band shows the price in perior n period
The middle line shows the upper-lower band.
There are two important strategies that are been used by traders which are breakout trading and reversal trading strategies.
INTERPRETATION OF DONCHAIN CHANNEL
1:Volatility-this could be seen as how drastically a market have change like in terms of rising and falling.
2.overbought and oversold-this can be said to be the trading that has a price above it's intrinsic value.this usually tends to make the market to move to a lower level.then oversold its actually when the market its very low there aren't any seller at that point in time in the market this will cause an uptrend in the market level.
3.Strong trends and key zone breakout-this tells when to buy or sell your currency in order to avoid loss.this breakout can occur either at an horizontal or diagonal level which could result to makeng excess gain at that point time.
