Donchian Breakouts by David Penn
Buy strength and sell weakness with this simple yet effective
breakout trading strategy.
There may be as many different forms of the
Donchian breakout as there are moving
average crossover or pattern recognition
strategies. This is not without good reason. As
the authors of The Ultimate Trading Guide
note, “Traders are always excited about leading-edge
technology, but inevitably fall back on the classical
Donchian breakout–oriented systems, in which trades
are initiated when current prices exceed the high or low
price of a given period, are chief among such classical
approaches. In fact, elements of the Donchian breakout
have found their way into a number of trading systems,
ranging from the Turtle trading system to a number of
mechanical price-range breakout approaches.
Many who have extended this breakout strategy have
cautioned that there is more to trading than n-period
breakouts. While this is absolutely true, it need not
detract from the effectiveness of Donchian breakouts in
terms of entering trades.