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Let's talk Donchian Breakouts

  • #41
  • Nov 19, 2010 1:24am Nov 19, 2010 1:24am
Quoting tradestar1
As to 15000 pips over the last 11 years.... that comes to about 1363 pips per year average, that does not assume every year made that.. Some years may have made more, some years may have been in drawdown. I have no problem with that, I am curious as to the exposure time involved to get those pips however.

I have a simple mechanical system that has generated 2062 pips last year and 1370 pips so far this year.
The system puts you in the market only two days a week.
I like those returns for the exposure much better.

Quoting tdion
Over 11 years of testing, 15,000 pips gained with no more than 1,000 pips drawdown at once. Losing months: have no idea. All years were positive returns.
Well it seems that he hasn't had any years that ended with a drawdown.

tradestar1:
Have you come up with this system all by yourself or is it also a remix of somsort from an old trading strategy? And do you trade all currencies or just some specifics? And many thanks for the Donchian strategy, where did you find it? From the forum or?

tdion:
So you only tade EUR/USD? Have you tested your system on any other pairs?
  • #42
  • Edited 2:04am Nov 19, 2010 1:46am | Edited 2:04am
The two day system is as far as I know mine...... I have not seen it anywhere else, at this point the only pair traded with it is EUR/USD.

I have checked a couple other pairs and they seem to also be profitable.

At this point my core trading system has generated 7238 pips so far this year. it is a mechanical system and my priority, as such I am not inclined to share that system on the forum, though it is unlikely many could actually trade it due to the discipline required.

Worst year for my core system was 2008, it's gain was only 970 pips.

Last year it made 5874 pips.
  • #43
  • Nov 19, 2010 1:52am Nov 19, 2010 1:52am
I'd like to look at other pairs, but my time and effort have gone into EURUSD just to get something on the street.

As we speak, I am turning the prototype code I wrote into state of the art software to run in a data center.

There will be a website to monitor the system. It's not commercial and not a signal service... just a way to advertise my own interest in Forex.
  • #44
  • Nov 19, 2010 4:29am Nov 19, 2010 4:29am
Hi,

Attached are 2 mt4 indies for donchian channels. The only difference between them is a "middle line" that one has (I added that myself...I am not a programmer but managed that change , although it may not add anything to the trading performance).

The 2 important parameters are "periods" which is obiously the number of periods it looks back to search for highs and lows, and "advance" which is very interesting because it shifts the indicator to the right, making price piercing the channel earlier, and that can be interesting (usual advance is 2).

The other 2 parameters (extremes and margins) do not seem to make much difference so i left them at the default value.

I found the donchian approach interesting, but I got frustrated with the pullbacks after the breakout. I guess one should not base the entry on the donchian breakout only, and add someting to the setup and wait for a pullback (then you lose the breakouts that just shoot off...)

Anyway, this is just a contribution to the ones using MT4, as I came across this thread and having used donchian and these indies before, and seeing that a donchian indicator was asked for...here it is.
Attached File(s)
File Type: mq4 Donchian Channels.mq4   3 KB | 863 downloads
File Type: mq4 Donchian Channels_middle_line.mq4   4 KB | 896 downloads
  • #45
  • Nov 19, 2010 5:58am Nov 19, 2010 5:58am
Do you now what moving averages he was using here ?


Also here is a link to a purely mechanical system from a guy that got banned....... EUR/USD Only

Not sure where he is now or what he is up to but it seemed to work.
__________________





Quoting tradestar1
You might want to talk to Bill Dunn about that. He has a strictly rule based system he has been trading for years with very good returns.

Here is a link to his WMA Fund performance.... WMA Fund

And yes losses are part of the trading game.... controlling those losses is part of a winning trading game.

Also here is a link to a purely mechanical system from a guy that got banned....... EUR/USD Only

Not sure where he...
  • #46
  • Nov 19, 2010 6:12am Nov 19, 2010 6:12am
Thanks for your posts .I started googling up on Richard Dronchian last w/e. Your posts will save me a lot of time as i can understand the way you talk and the easy format of FF.I find that on some sites that i have to adapt to the format of the information which gives me a headache, thanks again. Bookmarked for w/e reading.
All systems of divination, like music itself,work through patterns.
  • #47
  • Edited 7:46am Nov 19, 2010 7:36am | Edited 7:46am
Quoting tradestar1

I have a simple mechanical system that has generated 2062 pips last year and 1370 pips so far this year.
The system puts you in the market only two days a week.
I like those returns for the exposure much better.
Quoting tradestar1
At this point my core trading system has generated 7238 pips so far this year. it is a mechanical system and my priority, as such I am not inclined to share that system on the forum, though it is unlikely many could actually trade it due to the discipline required.

Worst year for my core system was 2008, it's gain was only 970 pips.

Last year it made 5874 pips.

So are you referring to two different systems performances or is the other only the performance of one system and the other the performance of all your systems put together?





Quoting tdion
I'd like to look at other pairs, but my time and effort have gone into EURUSD just to get something on the street.

As we speak, I am turning the prototype code I wrote into state of the art software to run in a data center.

There will be a website to monitor the system. It's not commercial and not a signal service... just a way to advertise my own interest in Forex.
Please keep us informed when you get the site up and running!
So do you mean that you have your system totally EA'd? I mean that the computer alerts when there are possible trade setups?
  • #48
  • Nov 19, 2010 7:58am Nov 19, 2010 7:58am
Quoting ariku
So are you referring to two different systems performances or is the other only the performance of one system and the other the performance of all your systems put together?
These are two separate systems, one is in the market 2 days a week the other is always in the market.
  • #49
  • Edited 5:07pm Nov 19, 2010 4:39pm | Edited 5:07pm
Ariku..................

If you want an excellent book on technical analysis, trading systems and Money management techniques pick up a copy of "The Ultimate Trading Guide" by John R. Hill, George Pruitt, & Lundy Hill.

it's a $95.00 book but you can likely find it on amazon for less.
  • #50
  • Nov 19, 2010 4:50pm Nov 19, 2010 4:50pm
What is fascinating about Donchian discussion is:

1) What is the lookback on your channel?
2) Are you trading it is a breakout (trend follower) or a counter trend (resistance)?
3) Are you using it in conjunction with other criteria to enter / exit your trades, entering strictly on the breakouts?
4) Do you have use a single channel, or nested channels? (2 or more)
5) What timeframe(s) do you use them on?
6) Do you use the close or the high / low of the previous candle to determine your breakouts?
7) What pair / market do you use it in?
  • #51
  • Edited 5:33pm Nov 19, 2010 5:21pm | Edited 5:33pm
The following is from page 185 of the Ultimate Trading Guide.

They then go on to discuss the systems with performance data.

FIVE APPROACHES USED BY THE BEST TRADING SYSTEMS
The top winning trading systems that we track basically fall into five different categories. That's it! All of the profitable trading systems that we have analyzed, has evolved from five basic approaches. And they are:
1. Donchian channel.
2. Moving average cross over.
3. Short-term volatility based open range breakout.
4. S&P day trade.
5. Pattern recognition.
In this section we are going to present complete turnkey systems based on these five approaches. The logic of these systems as well as the performance numbers will be fully discussed.
  • #52
  • Nov 19, 2010 5:28pm Nov 19, 2010 5:28pm
Personally I will never go for the cookie cutter strategies prescribed by TA books. Bullish Pennant Flags, Point and Figure, so on and so forth...

My philosophy is that a one size fits all approach is not going to work on every market.... SO KNOW YOUR MARKET and forget the others....

For me, it comes down to measuring momentum, and acting accordingly...



And one more thing: I feel that forex is NOT an investment market. People are not trying to profit on the pip level as retail traders are... the true manipulators are the 2000 lbs gorilla banks acting in behalf of their country.

Again, just my own opinion.
  • #53
  • Nov 19, 2010 6:08pm Nov 19, 2010 6:08pm
Maybe you should take a look at the book before you start talking about cookie cutters.......
  • #54
  • Nov 19, 2010 6:13pm Nov 19, 2010 6:13pm
Does it prescribe specific strategies to specific markets?

IE) Buy oil when X and Y happen
  • #55
  • Nov 19, 2010 7:24pm Nov 19, 2010 7:24pm
It covers a broad spectrum of strategy regarding stocks and commodities.

Here is a link to Futures Truth website, take a look..... Futures Truth Magazine

I am not affiliated with them in any way.
  • #56
  • Nov 20, 2010 2:08am Nov 20, 2010 2:08am
Quoting tradestar1
Ariku..................

If you want an excellent book on technical analysis, trading systems and Money management techniques pick up a copy of "The Ultimate Trading Guide" by John R. Hill, George Pruitt, & Lundy Hill.

it's a $95.00 book but you can likely find it on amazon for less.
.

Thank you very much tradestar for the book recommendation! Haven't heard of that book before. I will have to look if I can find it foor a good price. I also don't think that a book could give you the secret to trading ( i could be wrong) but i think the way to look at books is that they give you the fundamentals to trading and maybe some trading strategies that will help you is discover youre own method. But many thanks!
  • #57
  • Nov 20, 2010 11:12am Nov 20, 2010 11:12am
I've done a lot of research and back testing into Donchian channels and without spending too much time going into detail my results were pretty much the same as any other trending indicator. The indicator does tend to highlight periods of ranging better than most but this needs a bit of experience.

One notable exception was where the channel is compressed. There is then a high likelihood of a volatile break out which can be useful if traded correctly. Most seasoned traders know about this phenomenon and use many and various methods - Bollinger bands, boxes, S/R to identify these areas. For example a high number of London opens break out from the Asian session range. In case you weren't aware, these compression areas also form very strong areas of S/R in themselves.

I like the Donchian approach and I still use the channels to identify support and resistance - which are clearly defined with a bit of practice on any time frame. I also look for compression and I use a simple formula to identify the degree of compression.

The succesful Turtles (and there were some unsuccesful ones) using traditional Donchian trading benefited from a (mostly) nicely trending market and were tightly disciplined. You're going to need a lot of low leverage capital, patience and luck to trade that system in Forex.

I'm not going to elaborate on the foregoing because the positives I have outlined took a lot of work to identify and to try and reveal all my findings will entail even more work. Less experienced traders would cock it up anyway. God knows I do myself often enough.

I'll leave you with this chart which always makes me smile:

Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy101120.gif Size: 22 KB
Gone to a better place
  • #58
  • Nov 20, 2010 3:21pm Nov 20, 2010 3:21pm
Quoting tradestar1
The two day system is as far as I know mine...... I have not seen it anywhere else, at this point the only pair traded with it is EUR/USD.

I have checked a couple other pairs and they seem to also be profitable.

At this point my core trading system has generated 7238 pips so far this year. it is a mechanical system and my priority, as such I am not inclined to share that system on the forum, though it is unlikely many could actually trade it due to the discipline required.

Worst year for my core system was 2008, it's gain was only 970 pips.

Last...
Your system's profits are very impressive. Congratulations on developing such a fine-tuned mechanical system. Just one question: are those profits before or after paying the broker?
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #59
  • Nov 20, 2010 3:26pm Nov 20, 2010 3:26pm
Tradestar:

This is one position open at a time, or scaling in (and out)?
  • #60
  • Nov 20, 2010 4:35pm Nov 20, 2010 4:35pm
Tradestar:

In regard to the 2 day system: It sounds very similar to what I do with the Donchian Breakout. I use the DB to determine the direction of the trend, and then I enter trades on candlestick action with the intention of only taking a small piece of the move (much like you only staying in for 2 days)

Instead of trying to find the tops and bottoms of the trend, I let a DB with a short lookback show me where the current momentum is going, and I attempt to nickel and dime both large and small trends.

So in the end, if there was a large trend, hopefully I would have captured several small pieces of the move, instead of one large piece.


Thoughts?
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