Limited Donchian Channel is a free MT4 (Metatrader 4) indicator that can be used for trade entries and exits or as an additional trend filter that works together with an existing strategy or system.
The indicator appears in the main MT4 chart window as 3 colored lines (green, red, and dotted green) that form the Limited Donchian channel.
Buy & Sell Trade Example
- Open a buy trade when the price reaches the lower red line and the Limited Donchian channel is sloping upwards.
- Open a sell trade when the price reaches the upper red line and the Limited Donchian channel is sloping downwards.
For scalping purposes, the indicator tends to work the best during the London and American trading sessions.
The indicator works equally well on all assets (Forex, CFD stocks, Indices, Cryptocurrencies, Commodities,..) and shows promising results if used correctly.
Free Download
Download the “Limiteddonchianchanel.mq4” indicator for MT4
Indicator Chart (EUR/USD M15)
The picture below shows the Limited Donchian Channel mt4 indicator in action on the trading chart.
Tips:
Feel free to use your own favorite trade entry, stop loss and take profit strategy to trade with the Limited Donchian Channel Forex indicator.
As always, trade in agreement with the overall trend and practice on a demo account first until you fully understand this indicator.
Please note that even the best trading indicator cannot yield a 100% win rate over long periods.
Indicator Specifications & Inputs:
Trading Platform: Developed for Metatrader 4 (MT4)
Currency pairs: Works for any pair
Time frames: Works for any time frame
Trade Style: Works for scalping, day trading and swing trading
Input Parameters: Variable (inputs tab), color settings & style
Indicator type: Donchian bands
Does the indicator repaint? No.
Limited Donchian Channel + EW Trend MT4 Scalping Strategy
This MT4 scalping strategy combines the Limited Donchian Channel Forex Indicator and the EW Trend Indicator for Scalping.
The Limited Donchian Channel identifies the short-term market trend by the slope of the channel.
An upward-sloping channel indicates bullish momentum while a downward slope signals a bearish trend.
The EW Trend Indicator provides precise entry signals using its histogram.
A reading above zero indicates a buy opportunity, and below zero signals a sell.
This strategy is suitable for M5 and M15 charts for scalping quick intraday profits.
By combining trend direction with precise entry timing, traders can avoid false moves and enter positions when momentum is in their favor.
The strategy is ideal for highly liquid currency pairs where price reacts sharply to short-term swings, such as EUR/USD, GBP/JPY, and AUD/USD.
Buy Entry Rules
- The Limited Donchian Channel is sloping upwards, confirming a bullish trend.
- The EW Trend histogram is above zero, signaling a buy entry.
- Enter a buy trade at the open of the next candle after confirmation.
- Place a stop loss below the lower band of the Donchian channel or the recent swing low.
- Take profit at 5–12 pips or exit when the histogram turns below zero.
Sell Entry Rules
- The Limited Donchian Channel is sloping downwards, indicating a bearish trend.
- The EW Trend histogram is below zero, confirming a sell opportunity.
- Enter a sell trade at the next candle open after signal confirmation.
- Set a stop loss above the upper band of the Donchian channel or the most recent swing high.
- Take profit at 5–12 pips or exit when the histogram rises above zero.
Advantages
- Combines trend direction and precise entry signals for higher accuracy.
- Works well for quick intraday trades on volatile pairs.
- Simple setup suitable for beginners and experienced scalpers.
- Defined stop loss and take profit levels improve risk management.
Drawbacks
- False breakouts can occur during sideways markets.
- Requires active monitoring due to its short-term scalping nature.
- Stop losses can be hit frequently if the market oscillates near the channel bands.
- Performance may vary between currency pairs with different volatility profiles.
Case Study 1 – EUR/USD M5 Chart
EUR/USD showed an upward-sloping Donchian Channel during the London session.
The EW Trend histogram moved above zero at 1.0925.
A buy trade was executed at 1.0926 with a stop loss at 1.0918 and a take profit at 1.0931.
Within 15 minutes, the trade reached the target for a 5-pip gain before the histogram showed signs of weakening.
Case Study 2 – GBP/JPY M15 Chart
During the Tokyo session, GBP/JPY had a downward-sloping Donchian Channel.
The EW Trend histogram dropped below zero at 192.45.
A sell trade was entered at 192.42 with a stop loss at 192.75 and a take profit at 192.30.
The pair fell steadily, reaching the target within 20 minutes for a 12-pip profit before the histogram began to rise.
Strategy Tips
- Focus on pairs with high liquidity and strong intraday movements.
- Trade during the London and New York sessions for optimal volatility.
- Use M5 for more frequent entries and M15 for higher probability trades.
- Exit trades promptly when histogram signals change to prevent reversals from eroding profits.
- Keep risk per trade small due to the short-term scalping nature of this strategy.
This MT4 scalping strategy provides a clear and structured approach to capturing small intraday moves.
By aligning trend direction from the Limited Donchian Channel with precise histogram signals from the EW Trend Indicator, traders can maximize opportunities while managing risk effectively.
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Download the “Limiteddonchianchanel.mq4” indicator for Metatrader 4
