Background: The Donchian Channel method, also known as the 4-week or 20-day rule, was developed by Richard Donchian, one of the pioneers in commodity trend trading with mechanical trading systems. He also developed a trading system based on 5-day (a week) and 20-day (a month) moving averages.
Trading systems today tend to become very complex by taking advantage of computer-power, but the very simple Donchian Channel method was found to be the most successful of all approaches in studies of futures trading during the 1960s through the 1980s. Traders have made many modifications of these channel breakout systems, including the well-known Turtle trading technique used by Richard Dennis.
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