Donchian Channel, ATR Strategy

Explore a daily trading strategy for SP500 stocks using Donchian Channels for entry and ATR for risk management. Learn how to identify breakouts and manage trad

Published · Updated · Methodology: Technical Indicators

Part of: ATR & Volatility

  • Methodology: Technical Indicators
  • Content type: strategy
  • Timeframes: Daily
  • Markets: Stocks (SP500)

Indicators used

  • Donchian Channel
  • ATR

Source video

Decoded from: Probé la Estrategia de las Tortugas en 2025 y pasó esto by Secretos del Mercado — watch the original

Key timestamps:

  • 0:00 - Introduction to Turtle Trading Strategy
  • 2:00 - Donchian Channel explanation
  • 2:50 - Entry rule: new 20-day high
  • 3:20 - Stop loss rule: 2x ATR
  • 4:10 - Take profit rule: 10-day Donchian Channel low
  • 5:40 - Backtesting results and conclusion

Strategy overview

Average True Range (ATR) measures how much an instrument typically moves over a given period, which makes it the natural unit for sizing risk when volatility itself changes from market to market. This entry decodes a Spanish-language video from the channel Secretos del Mercado, "Probé la Estrategia de las Tortugas en 2025 y pasó esto", which revisits the Turtle Trading system — the famous 1980s experiment by Richard Dennis — and puts it back on daily charts to see how the original volatility-based framework behaves in a modern market.

The interesting part of this pairing is the division of labour between the two indicators. The Donchian Channel supplies the directional decision: it plots the highest high and lowest low of a lookback window, so a break of the upper band is by definition a new multi-day extreme, and a break of the lower band marks the point where a trend has given up enough ground to exit. ATR never says when to enter — it says how far away the stop should sit, expressed as a multiple of recent average range rather than a fixed number of points or a round percentage. That is what allows the same rule set to run across instruments with very different personalities, and it is why the Turtles are usually cited as the origin of volatility-normalised risk in systematic trading.

The video is structured as a walkthrough followed by a test: it introduces the Turtle concept, explains how the Donchian Channel is read, covers the entry, stop and profit-taking logic, and closes with a backtest and the author's conclusion — the "y pasó esto" of the title. This page catalogs the strategy as presented in that source, with the concepts and indicators identified; the numeric parameters and the full rule set belong to the source video itself.

Topics

donchian channel strategy · atr strategy · trading strategy · technical indicators · sp500 trading strategy · daily trading strategy · stock trading strategy · tradingview strategy · price action · swing trading

Frequently asked questions

Why does a Turtle-style strategy use ATR instead of a fixed stop?

Because a fixed stop in points or percent means something different on a quiet instrument than on a volatile one. ATR measures average recent range, so a stop expressed as a multiple of ATR automatically widens in turbulent conditions and tightens in calm ones, keeping the risk per trade comparable across markets.

How do the Donchian Channel and ATR complement each other here?

They answer different questions. The Donchian Channel is a price-extreme tool — it defines when a breakout has happened and when a trend has reversed enough to leave. ATR is a volatility tool that defines how much room the trade needs before the stop is hit. Direction from one, risk distance from the other.

What is the Turtle Trading strategy?

It is the trend-following system taught by Richard Dennis to a group of novice traders in the 1980s, built on breakouts of multi-day price extremes with volatility-scaled stops and position sizing. It is the historical reference point for most Donchian-plus-ATR systems that came after it.

Does a daily-timeframe breakout system like this still work today?

That is exactly the question the source video sets out to test, and it reports its own backtest and conclusion rather than a general claim. Anyone evaluating the approach should re-test it on their own instruments and date ranges — Strategy Decoder catalogs strategies like this one from video sources so you can find, compare and study them before committing capital.

About this strategy page

This trading strategy was decoded by Strategy Decoder's AI from a public YouTube trading video and turned into a structured, reviewable specification. In the interactive app this page shows the full entry and exit logic, risk management settings, the indicators involved with their parameters, AlgoWizard-compatible logic and a Pine Script export ready for TradingView backtesting — plus an automated backtest verdict when one has been computed for this strategy.

Strategy Decoder catalogs 2,229 decoded strategies. Each one is extracted with confidence scoring, cross-linked to the indicators it uses, and kept up to date as new videos are processed daily. Load this page with JavaScript enabled to use the interactive tools, or start from the strategy explorer to filter by methodology, market and timeframe.

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