Donchian Channel Trading

FXCM web trader also has them included (without installation, of course)…

for everybody interested in trend following, there are some interesting podcasts of Michael Covel on youtube called ‘Michael Covel on the Trend Following Radio’.

Those are also available on iTunes and TuneIn. Really good stuff. For some super in-depth convos with hedge fund managers, especially those that are trend followers, check out Top Traders Unplugged | Conversations with the World’s Top CTAs, Trendfollowers & Hedge Fund Managers. Scot Billington and Jerry Parker have some really good interviews there. The host, Niels Kaastrup Larsen, used to work for Jerry Parker and still does work for Bill Dunn.

-Adrian

here are some other brokers…

FXCC = MT4
FxPro cTrader = YES
FxPro MT4
FXTM = something called CHANNELS, looks like DCs, but dependant on TF and not changeable by the user
FxChoice = MT4/MT5

that’s for now…

i just put all available currency pairs on the quote list of Oanda’s fxTrade and realized that it’s 73 pairs!!!
what do you think of trading all of them?
quite a sick idea, but on the other hand…we just follow trends, so why not?

what would be a correct risk management to be able to do so? and would you want to be in all pairs at any time?

until now, i put my pending orders at the DCs of the bigger DC (normally 20) and trail SL on the smaller DC (normally 10)…and so i had always at least pending orders of all pairs i trade…
i remember you were using an additional filter to avoid being in every possible trade, no?
but wouldn’t you want to be in every possible trade to catch every possible trend?

If you can, trade 'em all. But be mindful of exotics with high rollover costs. Example: USD/CNH. I only take shorts in that one because the rollover on the long side makes the long trades not worth taking.

The point of trend following is to never miss a trade. The difference is that you may use a moving average or larger channel or something to choose direction. That way you will get into every major trend, you may just get in later and have less whipsaws.

-Adrian

yeah, you have to keep the rollover costs in mind…i’ll have a closer look and decide then which pairs are interesting…don’t have to be the whole 73 pairs…

mike

Yeah and I try to select pairs to diversify a bit. I don’t want every pair to include the $. I did a lot of work in a spreadsheet back in January to try to find the most currency diversification I can. But shortly thereafter, many dealers began cutting many of those exotics because they have floors or bands or whatever. I personally figure every currency is in some sort of band or has a floor or something whether that is stated by the central bank or not. When the euro reaches extremes the ECB will be sure to get involved, same goes for the FED and everyone else.

I missed that USD/RUB trend last year. I think with Oanda offering odd lots in exotics, trend followers can get at least some exposure to those trends in those diversifying pairs.

-Adrian

for the moment i stay with the 28 pairs of the combination of the 8 major currencies, plus Brent Crude Oil, West Texas Oil, Copper, Natural Gas, Silver, Corn, Soybeans, Sugar and Wheat…let’s see how it works out…

Mike

Who do you trade the commodities with?

-Adrian

That’s all with Oanda…

Mike

Oh right. CFDs. Our self-righteous-christian-nation-of-white-only-no-moslem-no-drug-no-prostitute-no-casino-witch-burners has us protected against that great evil. Oanda U.S. offers fx only.

-Adrian

Lucky you…you can’t imagine how hard that daily fight against that evil called ‘yourself’ is :wink:

Mike

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Meanwhile we call the emini a “future”. Ha!

-Adrian

hi adrian,

any update of your live trade?

mike

i will check this trading system with my 4 hour time frame

great, tell us your experience…and if you have any question, don’t doubt asking them here…

don’t get nervous if you start with a drawdown phase…it takes some time to get positive returns and the winning % is about 30-40%…but in the long term it brings you some nice profits…also have in mind your position sizing, to be able to survive the inevitable drawdown trend following systems normally have…

mike

OK so for the first time I was able with the close of last week to move this stop closer to the entry:


I moved the stop down to a pip or so above the new four week high. But, of course, the pair broke to a new four week high today:


My initial stop distance was 349.3 and my closed trade was a loss of 211.8 pips. So this trade was -.606R trade. This means I lost 60.6% of my initial risk. No biggie, just another day in the life of trading.

With that I will post more trades as time goes on…

-Adrian

This thread looks quite interesting, I’m subscribed.

I pretty much stick to the EURUSD, AUDUSD, and GBPUSD intraday (using other methods), but want to start looking at longer term trading with bigger R:R, so will start back testing using Donchian breakouts and see what settings I like and report back.

So far i like the weekly chart using Donchian(4), as above, and daily using Donchian(20) - the default. A slight variation I want to look at, is only have a pending order to buy (sell) if the upper (lower) channel has been flat for an extended period, see pic on the daily chart:


Any thoughts on TP or TS apart from the obvious of the other side of the channel as a trailing stop. I’m thinking TP on half when hit 2xATR, and trail second half with the other channel…?

I hope this thread doesn’t move too slowly, such as the nature of these set-ups!

hi steve,

great to have you on board…we will try to move the thread at an acceptable pace :wink:

with the donchian channels we don’t use a TP in the traditional sense, but a trailing stop (i’m sure you know that, but just for others that don’t)…i normally have 2 different channels, one for entries (normally 20) and the other to trail the stop (normally 10)…up to now i use these settings (DC 20 and 10) for all timeframes (from 1h to 6h) i use…

mike