Bollinger Bands vs Donchian Channels
Bollinger Bands draw a statistical envelope a number of standard deviations from a moving average. Donchian channels simply draw the highest high and lowest low over a lookback, so one is a calculated band and the other is a visible price level.
Both draw lines above and below price. One draws a statistic and the other draws the highest high and lowest low of a period, which is a real price rather than a calculation.
What each one is
Bollinger Bands plot a statistical envelope. A moving average with lines a chosen number of standard deviations either side. Bollinger Bands covers it.
Donchian channels plot the highest high and lowest low over a lookback period. Nothing is smoothed and nothing is calculated beyond finding the extremes. Donchian channels covers it.
One line is a number and the other is a price. That difference decides whether the level means anything to anybody but you.
Where they differ
Whether the line is a real price. A Donchian edge is a price the market actually traded at. A Bollinger edge is a computed distance from an average.
How the line moves. The statistical envelope adjusts continuously. A Donchian edge sits still until a new extreme is made, then steps.
What a touch means. Touching a statistical band is common by construction. Making a new twenty-bar high is an event with a name, and other people are watching for it.
What each supports. Only the Donchian version supports a breakout rule that other market participants would recognise, which matters because shared levels attract orders.
Where they agree
Both are backward-looking. Every value in each comes from bars that have already closed, and neither anticipates anything.
Both need a lookback. The period decides how responsive each is, and a value chosen for one instrument does not transfer to another.
Both fail in a range. On this site’s shared series direction runs average 2.01 bars with a longest of 11, and short runs produce constant touches and false breaks in either.
And neither supplies a stop. The ninetieth percentile bar range here is 1.101 and the largest single bar range was 2.338, which is what a stop at an edge has to survive.
Which one to use
Use Donchian channels for breakouts. A new extreme over a stated period is a checkable event, and on this site’s shared series 85% of 39 twenty-bar breakouts held.
Use Bollinger Bands when the width itself is the reading. Narrowing dispersion is a genuine feature of the statistical version and it does not exist on the extremes-based channel.
Use Donchian channels when you want a level others share. The highest high of the last fifty bars is visible to anybody, which is a mechanism a private statistic does not have.
And when you want a stop that steps rather than drifts, use Donchian. A trailing exit at the opposite edge is one of the plainest exits available.
Why a real price level behaves differently
Because orders sit where people can see. A twenty-bar high is a number lots of participants can compute identically, which is not true of a band whose multiplier you chose.
And because the event is unambiguous. A new extreme either happened or it did not, whereas a band touch depends on a multiplier you set.
What the measured breakout figures say
85% of 39 twenty-bar breakouts held on this site’s shared series, which is the base rate a breakout rule is working against.
100% of the 11 fifty-five-bar breakouts held, on a sample of eleven — suggestive rather than settled, and worth treating as such.
Longer lookbacks produced fewer and better breaks. Which is the trade-off: a longer period means waiting, and waiting is what filtered the sample.
And the base rate favours continuation. 54% of 566 ten-bar windows finished higher, so a break in the prevailing direction starts from a modest tailwind rather than a coin flip.
What to set before using either
The lookback period. Twenty and fifty-five are the conventional Donchian settings and both were chosen elsewhere; check what they produce on your instrument.
The multiplier, on the statistical version. It decides how often a touch happens, which is the whole reading.
Whether a wick or a close counts. A wick beyond an edge and a close beyond it are different events, and the ninetieth percentile bar range here is 1.101.
And what the stop is. Neither channel supplies one, and the largest single bar range here was 2.338.
The original data
Of the 24,971 unique videos in research/search-study-corpus.jsonl, no title compares these two
directly — this pair is constructed from two subjects the corpus covers separately. Separately,
Bollinger Bands appear in 259 titles at a median of 5,178 across 197 channels, and Donchian channels in
59 at a median of 10,071 across 54. The counts come from site/corpus_count.py.
259 videos on one at 5,178 and 59 on the other at 10,071. Four times the coverage and half the audience per video for the statistical version — the plainer tool draws twice the interest per upload while being taught a quarter as often.
The answer to the question on that chart is that only one of those is an event. A new twenty-bar high is a checkable fact; a band touch is a stated distance from an average — and on this site’s data 85% of 39 twenty-bar breakouts held.
When it fails
The failure is fading a band touch during a breakout, and the two tools are pointing opposite ways. Price makes a new twenty-bar high, which the Donchian channel reports as a break, while the Bollinger edge reads as stretched. Fading the band means shorting a confirmed breakout — and on this site’s shared series 85% of 39 twenty-bar breakouts held, so the trade is placed against the measured base rate.
The second failure is trading every band touch. They are common by design.
A third is using a lookback you did not check. The conventions came from elsewhere.
A fourth is accepting a wick beyond an edge. A close is a different event.
A fifth is stopping at a channel edge. The largest bar range here was 2.338.
And a sixth is running both as confirmation. They read the same bars.
Related
Bollinger Bands covers the statistical envelope. Donchian channels covers the highest-high-lowest-low version. And breakout covers the event the second one is built to mark.
The Donchian channel is the plainest indicator there is — the highest high and the lowest low, drawn. That plainness is its advantage: the level is a real price, other people can see it, and a break of it is an event rather than a statistical curiosity.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.