Lowest & Highest Values over N Bars
The Donchian-Style Envelope That Maps Dynamic Range and Breakouts
The Lowest & Highest Values over N Bars indicator – the heart of Richard Donchian's famous channel system – simply tracks the highest high (HHV) and lowest low (LLV) over a rolling window of N periods. Plotted together, they form a clean 'price envelope' or channel that shows the market's recent ceiling (resistance) and floor (support). Price breaking out signals potential trend starts; trading inside suggests range-bound action. It's the zero-lag, no-frills way to define dynamic S/R, gauge volatility via band width, and trigger objective breakout trades.
The Pure Formulas
Straightforward max/min:
- HHV(N) = \max(High_{t-N+1 \to t})
- LLV(N) = \min(Low_{t-N+1 \to t})
Envelope = HHV upper band, LLV lower band. Optional midline = (HHV + LLV)/2.
Interpreting Price vs Envelope
Market reads:
- Price > HHV: Fresh breakout – bullish strength.
- Price < LLV: Fresh breakdown – bearish pressure.
- Price inside bands: Range/consolidation – mean reversion likely.
- Bands widening: Volatility expanding – trend legs possible.
- Bands narrowing: Volatility contracting – squeeze building.
- Bands flat: Stable range – fade extremes.
Parameter Choices
N tunes the envelope:
- Short (5–10): Fast – intraday scalping, more whipsaws.
- Medium (20–55): Classic swing – Donchian/Turtle balance.
- Long (100–252): Macro – 52-week scans, position trading.
Guideline: N ≈ bars in your target cycle (20 ≈ one trading month).
Pro Trading Applications
Powerful roles:
- Breakout entries: Long above HHV, short below LLV.
- Range fading: Buy near LLV, sell near HHV in flat bands.
- Trailing stops: Longs trail below LLV(N), shorts above HHV(N).
- Volatility gauge: Band width change signals expansion/contraction.
- Midline pivot: (HHV+LLV)/2 as dynamic mean reversion target.
Turtle traders built fortunes on 20/55 Donchian breaks.
Strategy Sketches
Quick setups:
- Classic breakout: Long close > HHV(20); add on further breaks.
- Range fade: Flat bands → buy LLV touch, target midline.
- Trend trail: Uptrend → stop below LLV(10) for breathing room.
Smart Enhancements
Boost with:
- Midline: (HHV+LLV)/2 – mean reversion magnet.
- ATR/Keltner: Volatility confirmation on breaks.
- Volume/Momentum: Only trade breaks with participation.
- IHV/ILV: Freshness check on extremes.
Strengths and Limitations
The Wins
- Zero lag on extremes – instant envelope.
- Simple, proven breakout/range framework.
- Dynamic S/R + volatility width gauge.
- Works everywhere – no parameters beyond N.
The Gotchas
- Single-spike distortion – false breaks possible.
- Whipsaws in chop – needs filters.
- Price-only – add volume/momentum context.
- Flat in strong trends – lags expansion.
Your Envelope Launch Checklist
- Set N matching timeframe/cycle.
- Plot HHV/LLV bands + optional midline.
- Backtest breakout/fade rules with filters.
- Add volume/trend confirmation.
- Alert on price band crosses.
- Review N when volatility changes.
Key Takeaways
HHV + LLV over N = rolling price envelope – dynamic ceiling and floor.
Breaks = potential trends, inside = range play.
Zero-lag extremes + band width = volatility insight.
Foundation of Donchian/Turtle systems.
Simple power – map the range, trade the edges or breaks. Stay enveloped and trade strong!
Lowest & Highest Values over N Bars
The Donchian-Style Envelope That Maps Dynamic Range and Breakouts
The Lowest & Highest Values over N Bars indicator – the heart of Richard Donchian's famous channel system – simply tracks the highest high (HHV) and lowest low (LLV) over a rolling window of N periods. Plotted together, they form a clean 'price envelope' or channel that shows the market's recent ceiling (resistance) and floor (support). Price breaking out signals potential trend starts; trading inside suggests range-bound action. It's the zero-lag, no-frills way to define dynamic S/R, gauge volatility via band width, and trigger objective breakout trades.
Table of Contents
The Pure Formulas
Straightforward max/min:
- HHV(N) = \max(High_{t-N+1 \to t})
- LLV(N) = \min(Low_{t-N+1 \to t})
Envelope = HHV upper band, LLV lower band. Optional midline = (HHV + LLV)/2.
Interpreting Price vs Envelope
Market reads:
- Price > HHV: Fresh breakout – bullish strength.
- Price < LLV: Fresh breakdown – bearish pressure.
- Price inside bands: Range/consolidation – mean reversion likely.
- Bands widening: Volatility expanding – trend legs possible.
- Bands narrowing: Volatility contracting – squeeze building.
- Bands flat: Stable range – fade extremes.
Parameter Choices
N tunes the envelope:
- Short (5–10): Fast – intraday scalping, more whipsaws.
- Medium (20–55): Classic swing – Donchian/Turtle balance.
- Long (100–252): Macro – 52-week scans, position trading.
Guideline: N ≈ bars in your target cycle (20 ≈ one trading month).
Pro Trading Applications
Powerful roles:
- Breakout entries: Long above HHV, short below LLV.
- Range fading: Buy near LLV, sell near HHV in flat bands.
- Trailing stops: Longs trail below LLV(N), shorts above HHV(N).
- Volatility gauge: Band width change signals expansion/contraction.
- Midline pivot: (HHV+LLV)/2 as dynamic mean reversion target.
Turtle traders built fortunes on 20/55 Donchian breaks.
Strategy Sketches
Quick setups:
- Classic breakout: Long close > HHV(20); add on further breaks.
- Range fade: Flat bands → buy LLV touch, target midline.
- Trend trail: Uptrend → stop below LLV(10) for breathing room.
Smart Enhancements
Boost with:
- Midline: (HHV+LLV)/2 – mean reversion magnet.
- ATR/Keltner: Volatility confirmation on breaks.
- Volume/Momentum: Only trade breaks with participation.
- IHV/ILV: Freshness check on extremes.
Strengths and Limitations
The Wins
- Zero lag on extremes – instant envelope.
- Simple, proven breakout/range framework.
- Dynamic S/R + volatility width gauge.
- Works everywhere – no parameters beyond N.
The Gotchas
- Single-spike distortion – false breaks possible.
- Whipsaws in chop – needs filters.
- Price-only – add volume/momentum context.
- Flat in strong trends – lags expansion.
Your Envelope Launch Checklist
- Set N matching timeframe/cycle.
- Plot HHV/LLV bands + optional midline.
- Backtest breakout/fade rules with filters.
- Add volume/trend confirmation.
- Alert on price band crosses.
- Review N when volatility changes.
Key Takeaways
HHV + LLV over N = rolling price envelope – dynamic ceiling and floor.
Breaks = potential trends, inside = range play.
Zero-lag extremes + band width = volatility insight.
Foundation of Donchian/Turtle systems.
Simple power – map the range, trade the edges or breaks. Stay enveloped and trade strong!
Related Terms
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