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Let's talk Donchian Breakouts

  • #81
  • Jun 29, 2011 11:45am Jun 29, 2011 11:45am
tdion & tradestar1, it has been a pleasure reading your discussions! I wish you both every success with your strategies!

tradestar1, momentum is the only thing that's worked for me as well.

tdion, I know what you are doing. I use the same kind of strategy to complement longer term trend-following system. Interestingly enough, I was specifically looking for someone else who uses this approach and Google took me to this discussion thread. I fully agree with all of your assertions regarding the importance of momentum coming off S&R (the latter does not have to be linear). EURUSD appears to be the best pair for this strategy in FX. I am personally diversifying across EURUSD, AUDUSD, GBPUSD and USDCHF. So far, I have only been ably to "stabilise" the model on D1. H4 struggles and any shorter bars fail miserably due to the negative edge created by the cost of crossing the spread and skid.
  • #82
  • Jun 24, 2012 8:08pm Jun 24, 2012 8:08pm
This thread is bit old but I was thinking of using Donchian channel in my trading somewhere but then a question hit me:

--> What is difference between using moving average breakout vs Donchian channel breakout? Here is an example.

a) Trader A use 'xy' day Donchian channel price breakout to take a 'go long' signal and start looking for long entries according to preset rules.

b) Trader B uses price breaking above 'xy' day simple moving average to take a 'go long' signal and start looking for long entries according to preset rules.

Why the signal be more reliable if for trader A who uses Donchian channel for signal? Wouldn't each approaches result in equally random signals.
Just wondering.
  • #83
  • Jun 24, 2012 11:10pm Jun 24, 2012 11:10pm
Quoting raindrop
This thread is bit old but I was thinking of using Donchian channel in my trading somewhere but then a question hit me:

--> What is difference between using moving average breakout vs Donchian channel breakout? Here is an example.

a) Trader A use 'xy' day Donchian channel price breakout to take a 'go long' signal and start looking for long entries according to preset rules.

b) Trader B uses price breaking above 'xy' day simple moving average to take a 'go long' signal and start looking for long entries according to preset rules.

Why the signal...
I read a lot of post about Donchial channels here at FF and every other materials that is floating around the internet, bookstore and all information available. And nobody has ever said it... they explain and explain and yet missed the basic fundamental... Here is the importance of knowing all the intricacies of the how, why , where and what are you doing. If you don't know what you are doing, it is like using a hammer and not knowing how to use it; You don't know the difference between a soft hammer and a hard hammer's application. You don't know the difference between a heavy hammer versus a light hammer. And you may even question what is the goat-like pointy horns if you never seen what it is used for. And please don't deny it, everyone us were ignorant of this tool the first time we held it when we were young.

So here it is:

 

  1. A Donchian channel is correlated to a certain percentage of a Moving average envelope.

  1. The mid-line of a MA envelope is your moving average.

  1. The mid-line of a DC which 50% is exactly your moving average but not curved like a moving average.

  1. The high and low (support or resistance) of DC is the S/R of a MA envelope to a certain percent but only curved.

  1. A breakout or a bounce from a DC or MAE are the same.

  1. A trend line break or a bounce is exactly a break/bounce from a DC or MAE... or for that matter a certain percentage away from a MA.

  1. TL and SR is the exactly correlated to a DC, which is correlated to MAE ... which is correlated to MA... which is correlated to a MACD.... which is correlated to other indicators and oscillators.


And that is reason why, boys and girls...
why CrucialPoint DOESN'T draw TL, S/R
and don't search for shapes and patterns.
Because it is one elegant
mathematical equation that balances out,
that you can twist and turn
and yet still arrived to the same result....
With much more simplicity, might I add
(the no-history part is another story).

  • #84
  • Jun 24, 2012 11:44pm Jun 24, 2012 11:44pm
Quoting CrucialPoint
I read a lot of post about Donchial channels here at FF and every other materials that is floating around the internet, bookstore and all information available. And nobody has ever said it... they explain and explain and yet missed the basic fundamental... Here is the importance of knowing all the intricacies of the how, why , where and what are you doing. If you don't know what you are doing, it is like using a hammer and not knowing how to use it; You don't know the difference between a soft hammer and a hard hammer's application. You don't know...
Nice. What is the no history part? Mind sharing?
  • #85
  • Jun 25, 2012 12:16am Jun 25, 2012 12:16am
Quoting CrucialPoint
And that is reason why, boys and girls...
why CrucialPoint DOESN'T draw TL, S/R
and don't search for shapes and patterns.
Because it is one elegant
mathematical equation that balances out,
that you can twist and turn
and yet still arrived to the same result....
With much more simplicity, might I add
[color=DarkRed](the...
What exactly you mean by no history? Of course a trader needs history to some extent. One trader needs to look at weekly chart while the other one just needs the price for past few ticks.
  • #86
  • Jun 25, 2012 3:06am Jun 25, 2012 3:06am
Quoting raindrop
This thread is bit old but I was thinking of using Donchian channel in my trading somewhere but then a question hit me:

--> What is difference between using moving average breakout vs Donchian channel breakout? Here is an example.

a) Trader A use 'xy' day Donchian channel price breakout to take a 'go long' signal and start looking for long entries according to preset rules.

b) Trader B uses price breaking above 'xy' day simple moving average to take a 'go long' signal and start looking for long entries according to preset rules.

Why the signal...
A Donchian Channel will keep a trader out of a ranging market, to some extent. It is quite an important principle in this style of trading that a high or low of a preset time period has been broken and that the price has closed above it, or below it.
Gone to a better place
  • #87
  • Jun 25, 2012 3:35am Jun 25, 2012 3:35am
Quoting raindrop
This thread is bit old but I was thinking of using Donchian channel in my trading somewhere but then a question hit me:

--> What is difference between using moving average breakout vs Donchian channel breakout? Here is an example.

a) Trader A use 'xy' day Donchian channel price breakout to take a 'go long' signal and start looking for long entries according to preset rules.

b) Trader B uses price breaking above 'xy' day simple moving average to take a 'go long' signal and start looking for long entries according to preset rules.

Why...
the win rate is almost similar ....around 39%.as it has been said longer term periods work better, at least 4 months for donchian.

its funny Richard Dennis denounced trendfollowing ....risk of more than 2% will results in devastating drawdowns no matter how much you diversify.correlation between financial instruments has been devastating to trend following...maybe you think of trading commodities like soybean, natural gas ...there's about 5 markets that are truly uncorrelated until financial shocks occur and every thing moves together.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #88
  • Jun 25, 2012 4:06am Jun 25, 2012 4:06am
i'm a big fan of Steve Primo's strategies, super simple trend trading...

Inserted Video
tradewith60
  • #89
  • Jun 26, 2012 2:48am Jun 26, 2012 2:48am
Quoting pemully
the win rate is almost similar ....around 39%.as it has been said longer term periods work better, at least 4 months for donchian.
I'd say 39% would be a best case scenario, after some curve fitting. But yeah my backtesting results were similar.
  • #90
  • Jun 26, 2012 3:17am Jun 26, 2012 3:17am
I always wonder what happened to tdion. He still around or anyone know him?

Remember when he posted pic of his penthouse office above the bank in Germany.
  • #91
  • Jun 26, 2012 4:32am Jun 26, 2012 4:32am
Quoting raindrop
I'd say 39% would be a best case scenario, after some curve fitting. But yeah my backtesting results were similar.
no way! that is the average result ...infact 100 day donchian has around 42% win rate both in sample and out sample.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #92
  • Last Post: Feb 4, 2013 3:25pm Feb 4, 2013 3:25pm
Hey all,

I've downloaded every Donchian indicator I could find.

However, I'm looking for a slight tweak, the same basic indicator but one that incorporates the candles closing price over "N" periods (not the highest high and highest low).

Thanks
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