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Donchian's 20 Trading Guides

  
  Education
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richard-donchian
Richard Donchian is best known for developing the Donchian Channel Indicator. This is a simple trend following tool that detects and alerts you to breakouts by plotting the highest high and the lowest low over the last period time interval which the user specifies.
Through his many years of trading and writing weekly newsletters (Commodity Trend Timing), Richard Donchian shares with us some very valuable trend trading wisdom.

  1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
  2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
  3. Limit losses and ride profits, irrespective of all other rules.
  4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. (more…)

Spiraling Growth in Understanding

  
  Education
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It seems to me that growth in understanding of any subject happens in upward spirals. The X factor in this equation is passing time. The result is that you can study the SAME materials you studied during the last period, yet now these very same words contain a whole new level of meaning.

This is why it is good practice to go back and re-study the basics again after a certain chunk of time has passed. I’ve been doing this for the last week or so, going over the basics again – and it is like I never really READ it before. The very same material now contains whole new layers of meaning for me… But what’s really happening is that my understanding has increased over passing time and I’m in a new learning cycle, seeing it all again with the eyes of the experience I gained since the round.
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