Donchian 20-day breakout
The Donchian 20-day breakout buys NIFTY futures when a daily close clears the highest high of the previous 20 sessions and sells when a close falls below the lowest low of the previous 20. It is a classic trend-following channel system, a lighter cousin of the old turtle rules, and this version trades the long side only and holds positions for days or weeks.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
With only 10 trades the evidence is thin, but it is one-sided. The two trades held while NIFTY rose more than 1% made ₹23,238; the five held while it fell more than 1% lost ₹1,64,775. Eight of the ten trades were entered on a session that opened with a gap up of 0.4% or more, and those lost ₹1,86,650 in this test. That follows from the code: the signal is a close at a new 20-day high, and the buy happens at the next session's first tick, so a strong close followed by a gap up means paying a stretched price just before a pullback, with the exit a full 20-day low away.
About this strategy
- Each day, build two lines from the near-month NIFTY future's daily bars: the highest high and the lowest low of the 20 sessions before the latest completed bar.
- If yesterday's close moved above the upper line (and the close before it was not above its own line), buy one lot at the first tick of today's session.
- Hold with no fixed stop or target; the lower line trails upward as the trend runs.
- When a daily close drops below the lower line, sell at the next session's first tick.
- On each futures expiry day, close the long at 15:15 and buy the new near month at the next session's open, so each roll shows as a separate trade.
- After an exit, wait for a fresh close above the upper line before buying again.
Why traders use it
A close above a 20-day high says buyers have pushed past every level of the last month, which trend followers read as the start of a fresh leg. The exit channel lets the trade breathe: it only closes when the market makes a new 20-day low, so a strong trend can be held for weeks. The rules are mechanical, need one check after the close, and have been studied for decades, which keeps them popular as a first systematic futures strategy.
The year in plain words
With the default 20/20 channel on NIFTY from 1 Oct 2025 to 30 Sep 2026, the strategy logged 10 trades, of which 7 were monthly roll closes and 3 were exits on a close below the 20-day low. Only 2 made money. The net result was a ₹1,75,137 loss before costs and ₹1,76,498 after ₹20 per order and slippage, with a ₹1,96,790 drawdown before costs. October 2025 gained ₹21,652, but January lost ₹58,903 and May ₹44,070. Breakouts in this period mostly failed to follow through, so the rules kept buying highs that did not last.
What the settings do
Risks
- The exit is a full 20-day low, so a failed breakout can give back a whole month's range before the position is closed.
- Positions are held overnight with no stop, so gaps on news hit the full futures position.
- The daily bars come from the rolled future without adjustment, so a roll's price jump can itself look like a breakout.
- With only a handful of signals a year, one or two failed trades decide the result.
Who it suits
Traders who prefer a few positional futures trades a year, can carry full futures margin overnight, and can sit through large open losses while waiting for a trend. It needs patience with long losing runs.
Questions traders ask
What is the Donchian channel breakout strategy?
It draws a channel from the highest high and lowest low of the last N sessions. A close above the top line is a buy signal and a close below the bottom line is the exit. This version uses 20 sessions for both lines, trades NIFTY futures, and only goes long.
Is the Donchian 20-day breakout profitable on NIFTY?
Not in this backtest. From 1 Oct 2025 to 30 Sep 2026 it lost ₹1,75,137 before costs and ₹1,76,498 after ₹20 per order and slippage, winning 2 of 10 trades. A different year with a long steady trend could look very different, and past results do not guarantee future ones.
Why does the trade count include monthly rolls?
Futures expire every month, so a long held across an expiry is sold in the old contract and bought in the new one. Each piece is counted as its own trade, which is why 7 of the 10 trades ended with a monthly roll rather than a channel exit.
What is the difference between the 20/10 and 55/20 versions?
They are the two classic turtle settings. 20/10 enters on a one-month high and exits on a two-week low, reacting faster. 55/20 waits for a roughly quarter-year high and exits on a one-month low, trading far less often but aiming at bigger trends.