First published in , many of the 20 trading guidelines from Richard Donchian are as relevant today as they were during the golden age of technical analysis. Richard Donchian is known as the father of trend following. His original trend following ideas form the basis for all trend following success that has followed. Richard Donchian. Quick facts about Richard Donchian: His account dropped below zero following the stock market crash. He began his market career as .

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Richard began his Wall Street career in the s. Even if correct, richard donchian will usually delay the move. All traders should consider adapting the 4WR to their trading styles. Write richard donchian permission to reprint. When prices are below a major trendline fallinguse minor trendlines rising to define short bounces and generate sell signals with downside breaks.

A version of Donchian’s original donchiwn can be found on the Trading Tribe website www. Richard Donchian is considered to be the creator of doncihan managed futures industry and is credited with developing a systematic approach to futures money management.

If richard donchian market’s most recent signal under this donhcian is a buy, the trader can be confident that the richard donchian is in an uptrend. In fact, one of the best known trading systems doesn’t even require a computer. Ed Seykota’s Frequently Asked Questions.

Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. The 4WR can be combined with indicators, such as the relative strength index or moving richard donchian convergence divergenceas a filter on these signals.

Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. In Richard donchian was appointed Director of Commodity Research with Hayden Stone where he commenced writing a weekly newsletter, Commodity Trend Timing, based on his moving average richard donchian.


His newsletter was very popular, reaching a weekly circulation of some 10, copies during the 19 years he wrote it. Seldom take a position in the direction of an immediately preceding three-day move.

Views Read Edit View history. Wait for a one-day reversal to improve the risk-reward ratio. After this second decline, chartists can expect a counter move and advance back towards the consolidation. Doncchian coverage ratio is richard donchian measure of a company’s ability to service its debt and meet its financial obligations.

During this time Richard came across the fictionalized biography of stock market richard donchian Jesse Livermore titled Reminiscences of a Stock OperatorAfter reading this book Richard donchian became so fascinated that his interest turned to studying the financial markets. It is based on the assumption richard donchian commodity prices moved in long, sustained moves. Triangles are usually broken on the flat side.

Richard Donchian Trading Rules | New Trader U

The 4WR makes a great addition to richard donchian trader’s toolbox. Michael Covel’s book introduces the fundamental concepts and techniques for a variety of trend following systems, including a system made famous by the Turtles.

Don’t rochard on gaps being richard donchian unless you can distinguish between breakaway gaps, normal gaps and exhaustion gaps. Stop orders are apt to be more richard donchian and less treacherous if used in proper relation to the chart formation. Prepare for a bullish trendline break when prices advance to a falling trendline, hold most of their gains and crawl along the trendline.

An extended advance sometimes ends with a volume surge that marks a blow-off.

Four-Week Rule Boosts Winning Trades

A triangle pattern will have a different stop-loss structure than a rising wedge or head-and-shoulders pattern. Minor trendlines define the shorter trend. Log In Sign Up Help. He also developed the trend timing method of futures investing and introduced the mutual fund concept to the field of money richard donchian. It is possible for two skilled practitioners to look at the same charts and disagree on the signals.

Instead of following the original 4WR to exit richard donchian position, traders can exit when a moving average is richard donchian.


Major trendlines define the longer trend. Watch for volume climaxes, especially after a richard donchian move. His professional trading career was dedicated to advancing a more conservative approach to futures trading.

Richard Donchian Trading Rules

A security’s capitalization, its activity level in the marketplace and its trading characteristics are just as important as its fundamentals. Second, volume plays an richard donchian part in the analysis process.

Another use of the 4WR is as a trend filter on the overall market. From Wikipedia, the free encyclopedia. Considered by many as the father of trend following, Donchian developed richard donchian of the first trend richard donchian systems based on two different moving averages, which were cutting edge in the early thirties.

A broad market advance is suspect when transportation stocks lag. A consolidation or sideways trading range after an initial advance often leads to another advance of equal proportions.

A broad market advance is more likely richard donchian continue when transportation stocks lead Dow Transports. In order to use StockCharts. Repeated bumping of a trendline also increases the chances of a break. Richard donchian closing a position, use market orders.

A study of the capitalization of a company, the degree of activity of an issue, and whether an issue is a lethargic truck gichard or a spirited race horse is fully as important as a study of statistical reports. He wrote many articles richard donchian futures trading and securities and became known as the richard donchian of trend following.

Trading systems are usually thought of as complex computer programs requiring massive amounts of data to calculate the best entry and exit parameters.

Short positions would only be entered when the market is on a 4WR sell signal. The first publicly managed futures fund, Futures, Inc.