Donchian 4 week method

[mikeriley]

I was recently perusing some notes from Richard Donchian's 4 week strategy.

He was popular for advocating a 4 week new high method.
Whenever price exceeded highs four consecutive weeks,
he believed it was a good time to go Long. (or stay long)

I see NQ would presently make his list.

"How long, and how far, nobody knows,
but I'll ride it until she blows" - Unknown

 

[Millionaire]

What about a stop loss exit, where does that go?
And a profit taking exit.. Although both could be the same if you use a trailing stop.

20 day breakouts might have worked well 70 years ago, when Donchian first 'discovered' them.
But i read they stopped working as well many decades ago.

You could do a backtest using NQ, should be fairly easy to do once you define your exit strategy as well.

 

[mikeriley]

What about a stop loss exit, where does that go?
And a profit taking exit.. Although both could be the same if you use a trailing stop.

20 day breakouts might have worked well 70 years ago, when Donchian first 'discovered' them.
But i read they stopped working as well many decades ago.

You could do a backtest using NQ, should be fairly easy to do once you define your exits strategy as well.

Thanks Millionaire, I appreciate your insight.
For now, I'll let the tape decide, or until the
law of diminishing returns pimp slaps my
confirmation bias back to reality.

 

[easymon1]

I was recently perusing some notes from Richard Donchian's 4 week strategy.

He was popular for advocating a 4 week new high method.
Whenever price exceeded highs four consecutive weeks,
he believed it was a good time to go Long. (or stay long)

I see NQ would presently make his list.

"How long, and how far, nobody knows,
but I'll ride it until she blows" - Unknown

View attachment 292158

Good lookin' out, Eagle Eye!
That'd be easy to backtest. Go fine 12 situations that fit. If ya can't disprove it, go find a dozen more. Repeat untill you hit a hundred or you limit of disbelief. Take Action on the data.
Break a Leg.

 

[zghorner]

I was recently perusing some notes from Richard Donchian's 4 week strategy.

He was popular for advocating a 4 week new high method.
Whenever price exceeded highs four consecutive weeks,
he believed it was a good time to go Long. (or stay long)

I see NQ would presently make his list.

"How long, and how far, nobody knows,
but I'll ride it until she blows" - Unknown

View attachment 292158

I like the simplicity...I listened to a pretty good interview lately featuring Nick Radge who has run a really simple trend strategy for decades that you might enjoy...perhaps geared a bit much towards neophytes than you would like but still some decent stuff in there (linked below).

I think you really have to be comfortable with a loose stop for this to work...like approaching 20%. I would back test the 4wk breakout using various stops for a better idea what would work best in the current market...then maybe try 5wk, 6 wk, etc...

 

[zghorner]

What about a stop loss exit, where does that go?
And a profit taking exit.. Although both could be the same if you use a trailing stop.

20 day breakouts might have worked well 70 years ago, when Donchian first 'discovered' them.
But i read they stopped working as well many decades ago.

You could do a backtest using NQ, should be fairly easy to do once you define your exit strategy as well.

yea its basically the "slow" system the turtles used back in the 80s. From what I understand the turtles still trading today run a pretty similar system but with a much longer break out period.

 

[mikeriley]

I like the simplicity...I listened to a pretty good interview lately featuring Nick Radge who has run a really simple trend strategy for decades that you might enjoy...perhaps geared a bit much towards neophytes than you would like but still some decent stuff in there (linked below).

I think you really have to be comfortable with a loose stop for this to work...like approaching 20%. I would back test the 4wk breakout using various stops for a better idea what would work best in the current market...then maybe try 5wk, 6 wk, etc.

From what I've learned many who used the Donchian Method were trading
for a long trend/positional trading. They were expecting weeks to months
of prolonged trend action. So, I can understand the Bigboys no longer
willing to place bigger bets if the trend will not be sustained.

But, I'm a gambler at heart. I've use Donchian's 4 week
method before, but mainly for bearish moves. But, I never use it for longer
than a DAY move. I use it as a "scalper". IF price is still moving positive,
I'll usually go for 300 ticks at the close of the 4th week.
300 tick stop/300 tick profit target.

300 ticks is the most I'm willing to lose on this method.

Appreciate your insight.

 

[tango29]

I was in a system that traded using Donchian channels a long time ago. It was great when things trended, but was crushed when markets whipsawed. I remember a Swiss trade that was up $6000 and then whipsawed to the stop loss and ended up being a ~$2000 loss.

 

[Handle123]

If you spent time learning how to hedge opening positions and hedging deep open profits, your losses will be acceptable in almost any method other than under sixty minutes.

 

[Global OptionsTrades]

I use a slight variation of Donchian Channels for swing trading and it works pretty well.

Over the timeframe of your chart @mikeriley , signals were:
Buy 21/03/2022 at 14376
Sell 18/04/2022 at 13911
Buy 18/07/2022 at 11877 (for future reference close yesterday was 13667)

If you haven't already, pop data for a few years into a spreadsheet and play with it.