Last updated: 8 October 2026. Every screenshot below was recorded on 8 October 2026 on an IQ Option Practice account registered in Brazil, on EUR/USD 5-minute candles; the Chart analysis picture in Step 1 was recorded on 5 October 2026. We placed no real-money trade. The settings come from the platform’s dialog and the calculation from the published source code of the platform’s built-in indicators (Quadcode’s script library). The tested box shows what the two middle-line rules did on EUR/USD candles recorded between 29 September and 5 October 2026; the rules give no expiry, so the trade lengths are ours. The result says nothing about what will happen next.
The Donchian Channel draws three lines over the price chart: the highest high of the last 20 candles, the lowest low of the last 20 candles, and a middle line exactly between them. Richard Donchian invented it in the 1970s, and it shows the limits of the trend. Unlike Bollinger Bands, the price does not go outside the outer lines, because they are made from the price extremes. The middle line is traded in two ways: a candle that crosses it is a signal in the direction of the candle, and in a trend a rebound from the middle line is an entry with the trend. On 5-minute EUR/USD candles recorded between 29 September and 5 October 2026 the cross rule gave 127 signals and the 15-minute trades won 52.0% of the decided trades; the rebound rule gave 81 signals and 54.3%.
Quick answer
- What it plots: three lines over the price chart: the highest high (top line), the lowest low (bottom line) and their average (middle line) of the last 20 candles.
- Settings on the platform: Period 20; blue upper and lower lines, an orange middle line and a grey fill.
- Cross rule: a bullish candle that crosses the middle line upward is a buy; a bearish candle that crosses it downward is a sell.
- Rebound rule: in an uptrend, when the price comes to the middle line, rebounds and goes on up, buy; the mirror in a downtrend.
- Trend: an upward-moving channel with candles over the middle line is read as an uptrend, and a downward-moving channel with candles under it as a downtrend.
- Tested: cross rule 127 signals, 52.0% of the decided trades won; rebound rule 81 signals, 54.3% (15-minute trades). Break-even is 54.1% at an 85% payout, and a few days of one pair prove nothing.
How do you add the Donchian Channel on IQ Option?
Set the chart
Choose the asset, the chart type and the candle size first: the indicator is calculated from the candles on the chart. The examples in this guide use 5-minute candles on EUR/USD. These steps use the web traderoom on a Practice balance, and the numbers in each screenshot match the numbers in the text. If you do not have an account yet, see how to register.
Step 1: Open Chart analysis
Click the indicators button (1), the wave icon in the chart toolbar at the bottom left of the chart. The Chart analysis panel opens with the tabs Indicators, Templates, Widgets and Scripts. Stay on Indicators.
Step 2: Find the Donchian Channel
Type “Donchian” in the Search for indicators box (1), or open the Volatility list, and click Donchian Channels (2).
Step 3: Check the settings
The dialog has the tabs Basic settings (1), Colors and display and Script. The Period (2) opens at 20, the number of candles of the highest high and the lowest low.
Step 4: Check the colours and click Apply
Open the Colors and display tab (1). The tab has four rows: Upper line, Middle line and Lower line, each with a checkbox, a colour box and a line-style box, and Fill, the colour of the area between the outer lines. The upper and lower lines are blue and the middle line orange by default, and the fill is grey. Click Apply (3).
Step 5: Read the lines
Three lines are drawn over the candles: the upper line (1), the highest high of the last 20 candles; the middle line (2), in orange, halfway between the two; and the lower line (3), the lowest low of the last 20 candles. The area between the outer lines is lightly filled, and the price never goes outside them.
How is the Donchian Channel calculated?
The source code of the platform’s indicators takes the highest high of the last n candles as the top line and the lowest low as the bottom line, and draws their average as the middle line. With the default period of 20 on 5-minute candles that is the range of the last 100 minutes. The indicator shows the upper and lower limits of the trend, and traders like it for that reason. We read the three lines off the platform’s chart at 32 candles and compared them with this formula: the median difference was 0.01 pip for each line, and the platform draws the point of a candle at its close; the channel includes that candle itself.
The channel does not widen on a sudden move the way Bollinger Bands do; it follows the extremes and can only be crossed by a new high or low. On the 1,296 five-minute candles of our recording for which a channel of 20 exists, its width ranged from 2.6 to 76.1 pips, with a median of 15.8 pips. The close was above the middle line on 558 candles (43.1%), while EUR/USD drifted down in that period.
What are the two middle-line rules?
The rules watch the candles inside the channel and the middle line. Written so that every condition is checked on closed candles:
| Rule | Usual rule | Our rule for the replay |
|---|---|---|
| Cross, buy | A bullish candle crosses above the middle line | A bullish candle opens under the middle line and closes over it |
| Cross, sell | A bearish candle crosses the middle line | A bearish candle opens over the middle line and closes under it |
| Rebound, buy | In an uptrend the price comes to the middle line, rebounds and goes on up | The middle line is higher than 10 candles earlier, the previous candle closed over it, and this candle’s low reaches the line and it closes over it |
| Rebound, sell | In a downtrend the price comes to the middle line, rebounds and goes down | The mirror |
| Entry and expiry | Not stated | At the close of the signal candle; 15 and 5 minutes on 5-minute candles |
The trend is up when the channel moves upward and the candles form over the middle line, and down when the channel moves downward and the candles form under it. In a trending market the middle line can act as a support or resistance. The indicator may not suit every strategy and needs practice.
Four signals of the recording, step by step
The first Higher and the first Lower signal of each rule on 5-minute candles, in time order, not picked by outcome. All times are the platform clock, which is UTC minus three hours; the date is 29 September 2026. All four trades lasted 15 minutes and all four won, two of them by a hair.
The cross rule
Lower, 02:30. The bearish candle (1) opened at 1.13609, 0.4 pip over the middle line (1.136052), and closed at 1.135715 at 02:35, under it. The rule says Lower, and the trade opens at that close. It ends at 02:50, when the candle (2) that opened at 02:45 closes at 1.13554, 1.75 pips lower: it won.
Higher, 03:00. The bullish candle (3) opened at 1.13569, under the middle line (1.135957), and closed at 1.13619 at 03:05, over it. The trade ends at 03:20, when the candle (4) that opened at 03:15 closes at 1.136235, 0.45 pip higher: it won.
The rebound rule
Lower, 01:30. The middle line had fallen 2.93 pips in 10 candles, a downtrend, and the previous candle had closed under it at 1.13629 (middle line 1.136462). The candle (1) that opened at 01:30 rose to a high of 1.13643, just over the middle line (1.136423), and closed at 1.1362 at 01:35, under it: a rebound from the line. The trade ends at 01:50, when the candle (2) that opened at 01:45 closes at 1.13619, 0.1 pip lower: it won, by a hair.
Higher, 03:50. The middle line had risen 1.1 pips in 10 candles, an uptrend, and the previous candle had closed over it at 1.13634 (middle line 1.136068). The candle (3) that opened at 03:50 fell to a low of 1.136065, 0.03 pip under the middle line, and closed at 1.136145 at 03:55, over it: a rebound. The trade ends at 04:10, when the candle (4) that opened at 04:05 closes at 1.136195, 0.5 pip higher: it won.
The two middle-line rules, tested
We scored the two rules on the 1,334 five-minute candles of our recording with the default period of 20, entering at the close of the signal candle. The box also shows 5-minute trades and the same rules on 1-minute candles with a 5-minute trade.
Tested on IQ Option: the Donchian Channel middle-line rules, EUR/USD candles of 29 September to 5 October 2026
| Asset and candles | EUR/USD binary (regular, not OTC): 1,334 five-minute candles (2026-09-29 01:55 to 2026-10-02 20:55 UTC and 2026-10-04 21:00 to 2026-10-05 17:00 UTC); 1,505 one-minute candles (2026-10-02 18:23 to 2026-10-02 20:59 UTC and 2026-10-04 21:01 to 2026-10-05 19:28 UTC). The candles were recorded from IQ Option’s Practice traderoom. The replay places no orders; it only scores the rule on those closed candles, at an 85% payout. |
|---|---|
| Rule tested | The rules on closed candles, the option opening at the close of the signal candle: cross, Higher on a bullish candle that opens under the middle line and closes over it, Lower on a bearish candle that opens over it and closes under it; rebound, Higher when the middle line is higher than 10 candles earlier, the previous candle closed over it, and the candle’s low reaches the line and it closes over it, Lower in the mirror case. Donchian Channel (20) as the platform draws it. The box lists the cross rule on 5-minute candles with a 15-minute trade first, then the rebound rule and the variants. |
| Signals | Middle line crossed by a candle, 5-minute candles, 15-minute trade: 127 signals (64 Higher, 63 Lower) same, 5-minute trade: 127 signals (64 Higher, 63 Lower) Rebound from the middle line in a trend, 5-minute candles, 15-minute trade: 81 signals (34 Higher, 47 Lower) same, 5-minute trade: 81 signals (34 Higher, 47 Lower) Middle line crossed by a candle, 1-minute candles, 5-minute trade: 155 signals (82 Higher, 73 Lower) Rebound from the middle line in a trend, 1-minute candles, 5-minute trade: 81 signals (33 Higher, 48 Lower) |
| Outcomes | Middle line crossed by a candle, 5-minute candles, 15-minute trade: 66 won, 61 lost, 0 tied; 52.0% of the 127 decided trades won; net −$0.04 per $1 staked at 85% (−$0.01 at 91%) same, 5-minute trade: 54 won, 70 lost, 3 tied; 43.5% of the 124 decided trades won; net −$0.19 per $1 staked at 85% (−$0.16 at 91%) Rebound from the middle line in a trend, 5-minute candles, 15-minute trade: 44 won, 37 lost, 0 tied; 54.3% of the 81 decided trades won; net +$0.01 per $1 staked at 85% (+$0.04 at 91%) same, 5-minute trade: 40 won, 40 lost, 1 tied; 50.0% of the 80 decided trades won; net −$0.07 per $1 staked at 85% (−$0.04 at 91%) Middle line crossed by a candle, 1-minute candles, 5-minute trade: 71 won, 82 lost, 2 tied; 46.4% of the 153 decided trades won; net −$0.14 per $1 staked at 85% (−$0.11 at 91%) Rebound from the middle line in a trend, 1-minute candles, 5-minute trade: 53 won, 27 lost, 1 tied; 66.2% of the 80 decided trades won; net +$0.22 per $1 staked at 85% (+$0.26 at 91%) |
| Break-even | At an 85% payout a trade needs to win more than 54.1% of its decided trades to break even (1 ÷ 1.85); at 91%, more than 52.4% (1 ÷ 1.91). |
A replay is only a look back at candles recorded on the dates above: it placed no real orders, covers about four and a half days of one pair, and counts overlapping trades as if they were independent. A short test proves nothing about the future, and no profit and no win rate is promised here. IQ Option’s own blog on backtesting says that most strategies need dozens, and often hundreds, of trades before a result means anything.
- Cross of the middle line: 127 signals; 15-minute trades won 66 and lost 61 (52.0%), 5-minute trades 54 and 70 (43.5%); on 1-minute candles with a 5-minute trade 71 and 82 (46.4%).
- Rebound from the middle line: 81 signals; 15-minute trades won 44 and lost 37 (54.3%), 5-minute trades 40 and 40 (50.0%); on 1-minute candles 53 and 27 (66.2%).
The cross rule sits at or under 52% in every variant. The rebound rule is level with the break-even rate of 54.1% on 5-minute candles, and its 1-minute result, 53 of 80 decided trades, is the highest of the readings, with a 95% interval of 55% to 76%. That reading rests on 25 hours of 1-minute candles, most of them in two steady moves, so it is a result to test again on other days, not a rule to rely on.
Pros and Cons of the Donchian Channel
| Pros | Cons |
|---|---|
| Shows the real extremes of the last 20 candles, so the channel is easy to read. | The price never leaves the outer lines, so they do not mark an overbought or oversold price by themselves. |
| The middle line gives a simple level for entries inside a trend. | The cross rule won 52.0% and 43.5% with two expiries on 5-minute candles. |
| The settings can be changed to suit a trading style: period, colours and fill. | The indicator needs practice and may not suit every strategy. |
Common mistakes
- Expecting the price to break through the outer lines. The lines are made from the extremes; a close at the top line extends it.
- Comparing it with Bollinger Bands one to one. Donchian lines come from highs and lows, Bollinger bands from the standard deviation.
- Trading every cross of the middle line. In a ranging market the price crosses it again and again.
- Skipping the trend. The rebound rule is for a trending market.
- Trusting the one-minute result. 80 decided trades on 25 hours of data is thin.
Related guides
- Donchian Channel and RSI and Bollinger Bands on IQ Option
- Fractal Chaos Bands and STARC Bands
- Trading a ranging market
- All indicator guides and all strategy guides
Frequently Asked Questions
Q: What is the Donchian Channel?
A: An indicator of three lines: the highest high of the last n candles, the lowest low, and the average of the two. Richard Donchian invented it in the 1970s.
Q: What is the default period on IQ Option?
A: The dialog opens with a Period of 20.
Q: How do I trade the middle line?
A: Buy when a bullish candle crosses above the middle line and sell when a bearish candle crosses it downward; in a trend, also enter on a rebound from the middle line.
Q: How is it different from the Bollinger Bands?
A: Both look like a channel around the price, but the Donchian lines come from the price extremes and the Bollinger bands from the standard deviation, so the price can go outside the Bollinger bands and not outside the Donchian lines.
Q: Does the Donchian strategy win?
A: On 5-minute candles the cross rule won 52.0% and the rebound rule 54.3% of the decided trades with a 15-minute expiry, both within the margin of error of the break-even rate.
Q: How long should the trade last?
A: No expiry is given. We scored 15 minutes and 5 minutes on 5-minute candles.
