Donchian Channel Trading

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

Cool, I’ve never though of using them for intraday trades (or at least lower timeframes as a trend trade, even on a lower timeframe can still last a long time), might take a look at that too, especially if the rules are such to try creating an EA.

I do like the idea of the 10 DC for TS.

How long do your 4hr trades usually last on average?

Anybody pick up an AUDUSD long position with a pending order on a break above the Upper Donchian Channel?

AUD/USD broke new four and ten week highs this week. But they did so below the two hundred day moving average so I did not go long. I will go long that pair if/when it breaks above the two hundred day moving average. I trade Donchian Channels only in the direction away from the moving average. (Donchian himself did that).

AUD/JPY rose above the two hundred day moving average this week. If we get any price activity above this week’s high during next week’s session, I will go long that pair.

-Adrian


The new four week high in the EUR/USD pair got me out of this trade. This was the first new four week high since last June. I was in the trade from last December until today. I did not enter the trade back in June because I was trading smaller time frames and counter-trend trades while working on position sizing ideas. But I entered this trade in December knowing I would wait for the next four week high to get out. The result was 1337.7 pips earned with an initial stop position risk of 358 pips. Thus, this trade was a 3.73R trade.

-Adrian


The euro bounce took me out of this trade with a new four week high today. The EUR/JPY crossed below the two hundred day moving average back in mid January and I went short during the week after the 10th. It took fourteen weeks to see a new four week high and that high was 855.2 pips lower than my entry. With about 740 pips in initial risk, this trade gave me 1.16R.

-Adrian


A potential entry for the coming week(s) has appeared in the USD/CHF pair. This pair crossed back below the two hundred day moving average this week. I will enter to go short next week if there is any price activity below this week’s low. I will take THREE positions, one with the stop above the four week high, another with the stop above the ten week high, and another with the stop above the twenty week high. Each of these will have position sizes that will give them the same risk value from entry to stop. Thus the four week channel position will be largest, the ten week channel position will be smaller, and the twenty week channel position will be smallest.

-Adrian

Looks good Adrian, I’m liking your approach!

how did I miss this thread. too bad it died, im still trying to grasp a few things

Maybe this thread should be moved, it might gain some traction. trend trading a good subject


As I mentioned before, the USD/CHF passed below the two hundred day moving average (MDMA) last week. As a result, I put in three orders to go short at a pip below last week’s low. Each order risked the same dollar amount, but they each had different stop distances and different position sizes. One position has a stop at the four week high, another has a stop at the ten week high, and the third has a stop at the twenty week high.


I placed the orders with Oanda (which does not include Donchian Channels as an option in their trading platform). The price did go below the low last week and trigger the orders and the above image shows the stops as red lines. The chart there is a “min/max” chart. It doesn’t show candles, it simply shows the highs and lows of each week. One can easily find the four, ten, and twenty week highs and lows on that chart.

So what I am doing is trading three systems in one market. I am trading a four week channel, a ten week channel, and a twenty week channel in USD/CHF.

If you look back at the history in this pair (or any other for that matter) you will see that of those three different channels, there are times wherein the four week channel performs best, times wherein the ten performs best, and times wherein the twenty performs best. If a trader picks any one of those channels in the expectation or hope that he will have chosen the “best” one, he is trading a curve fitted system. A fitted system is simply one that best performs historic price data. The reality is that nobody can predict which system will perform the best and the one we choose if we do so has just as much likelihood to be the worst performer as it does to be the best. To avoid choosing a system that could possibly be the worst performer, we can diversify our position by spreading it over more than one system.

These three positions could be all losers, they could be all winners, nobody knows. I am risking just 26 basis points of my closed account equity on each, 78 basis points total. In other words, if all three were stopped out today, I would lose 0.78 percent of my closed account equity. With that, a sudden 20% move like that of Jan 15 would lose me less than 2% of my account equity. The only thing left to do is to update the stops each week as the channel highs either fall or get taken out.

-Adrian

Im have a order in at 95.98. Just wondering if it met all the parameters for a valid trade.

well im having problem getting image on. but its audjpy daily


this 1 lol

hi guys,

sorry, that i didn’t post for a long time…i was very busy lately…i will try to go through the thread and answer cronologically…

mike