Donchian channel breakouts on crypto
Buying a new 20-bar high and selling at a 10-bar low made +55.2% a year on 4-hour bars after costs. All 13 settings made money on 4-hour bars and 8 passed the two-period test; on bars of 15 minutes or less, none made money.
How it works
A Donchian channel is the highest high and the lowest low of the last n bars. The classic breakout rule, made famous by the Turtle traders in the 1980s, buys when the price breaks above the highest high and sells when it falls below the lowest low of a shorter window.
What we tested
- Buy on a close above the highest high of the last 10, 20, 55 or 100 bars; sell on a close below the lowest low of the last 5, 10, 20 or 55 bars, the exit window never longer than the entry window: 13 settings.
Every setting was run on eight bar lengths, from 1 minute to 4 hours, on Upbit's Korean-won market: 12 large coins from January 2024 to October 2026 (from January 2025 on 5- and 10-minute bars; 8 coins from April 2026 on 1- and 3-minute bars). Signals are taken at a bar's close and filled at the next bar's open, spot buying only, with equal money in each coin. Every trade pays Upbit's 0.05% fee plus one price tick of slippage. That makes 13 single-indicator settings, and 1,764 more combinations where the best of them were given a filter or an exit rule. Full method.
Results by setting and bar length
Each cell is the yearly return after costs over the whole period. An outlined cell passed the two-period test: at least +10% a year in both the first and the second period, with the second keeping at least half of the first.
Return per year after costs, %
Sea level (0) is break-even after costs: blue is under water, green to brown is land.
Settings above water after costs: 13 of 13 on 4-hour bars, 6 of 13 on 1-hour bars, 2 of 13 on 30-minute bars, and none on 15-minute bars or shorter. Passed the two-period test: 2 on 1-hour bars, 8 on 4-hour bars.
| Setting | 1m | 3m | 5m | 10m | 15m | 30m | 1h | 4h |
|---|---|---|---|---|---|---|---|---|
| Donchian 10/5: buy 10-bar high, sell 5-bar low | −100.0 | −100.0 | −100.0 | −99.1 | −95.3 | −79.9 | −39.4 | +29.3 |
| Donchian 10/10: buy 10-bar high, sell 10-bar low | −100.0 | −100.0 | −99.9 | −98.2 | −92.1 | −70.7 | −30.6 | +38.5 |
| Donchian 20/5: buy 20-bar high, sell 5-bar low | −100.0 | −100.0 | −99.8 | −96.3 | −88.2 | −61.9 | −23.2 | +41.6 |
| Donchian 20/10: buy 20-bar high, sell 10-bar low | −100.0 | −99.9 | −99.5 | −94.8 | −84.0 | −51.2 | −20.4 | +55.2 |
| Donchian 20/20: buy 20-bar high, sell 20-bar low | −100.0 | −99.7 | −98.7 | −92.0 | −74.0 | −39.7 | −11.8 | +50.6 |
| Donchian 55/5: buy 55-bar high, sell 5-bar low | −100.0 | −99.0 | −97.2 | −82.1 | −65.9 | −31.1 | −0.2 | +38.1 |
| Donchian 55/10: buy 55-bar high, sell 10-bar low | −100.0 | −98.0 | −95.5 | −79.3 | −61.2 | −19.6 | −0.4 | +43.4 |
| Donchian 55/20: buy 55-bar high, sell 20-bar low | −100.0 | −97.0 | −93.3 | −73.6 | −47.1 | −15.4 | +12.8 | +48.3 |
| Donchian 55/55: buy 55-bar high, sell 55-bar low | −99.8 | −92.2 | −85.6 | −58.7 | −28.7 | +2.4 | +22.9 | +24.2 |
| Donchian 100/5: buy 100-bar high, sell 5-bar low | −100.0 | −95.8 | −90.9 | −67.1 | −47.4 | −15.5 | +6.8 | +33.7 |
| Donchian 100/10: buy 100-bar high, sell 10-bar low | −100.0 | −93.2 | −87.1 | −63.8 | −42.3 | −6.4 | +6.9 | +41.6 |
| Donchian 100/20: buy 100-bar high, sell 20-bar low | −99.8 | −91.5 | −83.4 | −58.4 | −27.4 | −6.0 | +23.2 | +44.5 |
| Donchian 100/55: buy 100-bar high, sell 55-bar low | −99.2 | −83.3 | −73.0 | −44.9 | −13.0 | +12.1 | +34.6 | +29.0 |
Adding filters and exit rules
On each bar length, the settings with the best first-period results were combined with up to two filters (trend on a longer chart, ADX, volume, RSI range, Bitcoin's trend) or one filter and an exit rule (stop-loss, trailing stop, take-profit, time limit). Combinations were only built where this indicator ranked among the leaders in the first period.
| Bars | Combinations that traded | Passed | Best that passed | Return a year | Worst fall | Second period |
|---|---|---|---|---|---|---|
| 1-minute | 84 | 0 | None passed. Best overall: −83.9% a year | |||
| 30-minute | 579 | 62 | Donchian 55/55: buy 55-bar high, sell 55-bar low + 4-hour chart above EMA 200 + ADX(14) above 25 | +23.7% | −30.7% | +25.5% |
| 1-hour | 579 | 265 | Donchian 100/55: buy 100-bar high, sell 55-bar low + volume above 1.5× its 20-bar average + stop 2% | +44.4% | −27.4% | +31.7% |
| 4-hour | 522 | 258 | Donchian 20/10: buy 20-bar high, sell 10-bar low + close above EMA 100 + volume above its 20-bar average | +56.6% | −21.4% | +45.2% |
What we learned
- Donchian breakouts were the most consistent rule relative to the number of settings tested: 8 of 13 passed on 4-hour bars.
- Shorter channels did best on 4-hour bars (20-bar entries: median +50.6%), longer ones on 1-hour bars, where only the 100-bar entries made money with every exit (median +15.1%).
- Volume helped on 1-hour bars: Donchian 100/55: buy 100-bar high, sell 55-bar low + volume above 1.5× its 20-bar average + stop 2% made +44.4% a year, the best 1-hour setup that passed the test (worst fall −27.4%).
- Most trades lose. The median 4-hour setting won 36% of its trades; the profit came from a few long trends. Why that is normal for trend following.
- Academic work agrees: in a study of Bitcoin trading rules from 2010 to 2019, trading-range breakouts were the only family that consistently beat buy-and-hold (Gerritsen et al., Finance Research Letters, 2020).
Questions
Do Turtle trading rules work on crypto?
In this backtest, yes on 4-hour bars: the 55/20 rule made +48.3% a year after costs and the 20/10 rule made +55.2%; both passed the two-period test. On daily charts in a separate test of 22 coins, the same rules made +24.9% and +21.8% in total over two years.
Which Donchian settings work on 1-hour charts?
Only long channels: buying a 100-bar high and selling at a 20- or 55-bar low passed the two-period test (+23.2% and +34.6% a year).
Every setup with this indicator in the explorer: 4h 1h 30m 15m