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.
- Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.
- From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
- Limit losses and ride profits, irrespective of all other rules.
- 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…)