Donchian Channels
Volatility & Bandsdraws on the price
The raw 20-bar high and low, no averaging at all. A close outside yesterday's channel is a breakout by construction, not by threshold.
On this chart: 20-period high / low.
What it measures
Donchian Channels are the simplest band on the chart: the highest high and lowest low of the last 20 bars, with a midline between them. No averaging, no scaling — which means a close above the prior channel top is a new 20-bar high by definition. Richard Donchian's trend-followers, and later the Turtles, built entire systems on exactly that event.
How to read it
The channel top is the level that, if exceeded, makes a new 20-day high; the bottom is the mirror. Channel width is a plain-English volatility reading — the stock's actual 20-day range in dollars, gaps and all.
Using it on the wheel
The channel floor is a concrete reference: a put strike below the 20-day low is below every price the stock has touched in a month. The channel's dollar width also grounds strike math — it is the demonstrated recent range, before any model gets involved.
Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.