Quantitative Finance & Trading
Donchian Channel & Turtle Position Sizing Formula: N-Bar High/Low Midpoint & 1% Risk Unit
Compute Richard Donchian’s N-period breakout channel (MAX High, MIN Low, Equilibrium Midpoint) paired with Dennis & Eckhardt’s volatility-parity 1% ATR Unit Size.
Combine N-bar Donchian breakout bounds with volatility-normalized unit sizing!
Pioneered by Richard Donchian (1960) and famously systematized by the Turtle Traders, a Donchian Channel tracks the rolling N-bar Upper_Band = MAX(High_Range), Lower_Band = MIN(Low_Range), and Center_Line = (Upper_Band + Lower_Band) / 2 (using prior N bars to avoid look-ahead bias on breakout triggers!).
To equalize dollar risk across calm bonds and volatile commodities, Turtle position sizing allocates 1% of Account Equity (B7) per 1*N (ATR Dollar Volatility per contract/share, B8): Unit_Shares = INT((0.01 * Equity) / Dollar_Volatility)!
| Donchian / Turtle Metric | Inputs | Computed Value |
|---|---|---|
| 5-Bar Highs [52..60] & Lows [46..53] | Upper = 60, Lower = 46 | Midpoint = 53.00 | Span = 14.00 |
| 1% Volatility Risk Unit ($100k Equity) | Dollar ATR per Share = $2.50 | INT($1,000 / $2.50) = 400 shares |
Donchian N-Bar Channel Equilibrium Midpoint
Averages the N-bar rolling ceiling MAX(B2:B6) and floor MIN(C2:C6).
=IF(MIN(C2:C6) > MAX(B2:B6), "Low Exceeds High", ROUND((MAX(B2:B6) + MIN(C2:C6)) / 2, 2))Volatility-Normalized 1% Equity Risk Unit Size (Whole Shares)
Divides 1% of account equity (0.01 * B7) by per-share ATR dollar volatility B8 and truncates via INT.
=IF(OR(B7 <= 0, B8 <= 0), "Requires Positive Equity and ATR", INT((0.01 * B7) / B8))Try the example
Use the original values or change them to test your understanding.