Trend following trades are one thing – catching those big trend waves. These are the trades that could instantly change a trader's account. These are those trades that could double a trading account after several trades with such profits. These are those trades that could earn 10 times the risk associated with a trade. These are the types of trades that traders dream of. However, it's pretty hard to catch.
The Donchian Trend Forex Trading Strategy is one of those trading strategies that might allow traders to catch these type of trades from time to time. It doesn't happen every day, but it could happen with this strategy.
The Donchian Channel is an indicator developed by Richard Donchian. This indicator draws a line above and below a center line, similar to the Bollinger Bands. That is where similarities end, however.
The Donchian Channel is a simple indicator that observes the highest high and the lowest low over a set period of time. It then marks the highest high as the top line and the lowest low as the bottom line. This allows traders to judge which price is considered extreme within a time period. The center line is simply the average of the highest high and lowest low, or the median of the range for a given time period.
This indicator is a very simple yet very powerful indicator as it enables traders to effectively identify extremes as well as the middle price of a range.
Double CCI woodies
The Double CCI Woodies indicator is based on the Commodity Channel Index (CCI). The CCI indicator compares a simple moving average (SMA) with the typical price. The resulting calculation is then recorded as an oscillating indicator in a separate window. This enables traders to observe long-term trend changes. However, this could also be changed to observe short-term trends.
The Double CCI Woodies take two CCI calculations and plot them on a chart. This could then be used as an input using crossings of the two lines or as an indicator to observe a short term trend.
This trading strategy is a crossover strategy that uses the Donchian Channel and a Simple Moving Average (SMA).
We will be using a 30 period SMA as the main signal line, while the center line of the Donchian Channel will be our faster moving trigger line. Trades are made whenever the midline of the Donchian Channel crosses the 30 SMA.
We will also be using the Double CCI Woodies indicator as a confirmation or as a free indicator. Trading signals should be filtered using the histogram bars of the Double CCI Woodies indicator. This should confirm whether the trend reversal signal is valid.
- 30 SMA (gold)
Time window: 1-hour, 4-hour, and daily charts
Currency pairs: Major and minor pairs
Trading session: Meetings in Tokyo, London and New York
Buy Trade Setup
- The Trend CCI Woodies indicator should print positive green histograms that indicate an upward trend
- The blue line on the Donchian Channel indicator should be above 30 SMA, indicating a bullish trend reversal
- Enter a purchase order on the confluence of these conditions
- Set the stop loss below 30 SMA
- Close the trade once the blue line on the CCI Woodies indicator drops below zero
Sell Trade Setup
- The Trend CCI Woodies indicator should print negative red histograms that indicate a bearish trend
- The blue line on the Donchian Channel indicator should be below 30 SMA, indicating a bearish trend reversal
- Enter a sell order on the confluence of these conditions
- Set the stop loss above 30 SMA
- Close the trade as soon as the blue line on the CCI Woodies indicator is above zero
The Donchian Trend Forex Trading Strategy is a high yield trading strategy. The longer-term perspective of the indicators used allows traders to catch trades that could develop over a longer period of time. This enables traders to catch trades that could result in a reward-to-risk ratio of 8: 1 or even 10: 1.
However, these high-yield trades don't happen every day. There will be trading configurations where the trend is short-lived. For this reason, it would be wise to also watch the stop loss wisely to protect the profits. Trade management is an important key in this strategy as we try to follow the trend from start to finish. We want to avoid being stopped prematurely, but we also don't want to become perplexed if the market reverses too soon.
Catching long term waves is quite difficult due to the unpredictability of the market. It would be best to use this trading strategy on a currency pair or market condition that is not often too choppy.
Forex Trading Strategy Installation Instructions
The Donchian Trend Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator (s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
The Donchian Trend Forex Trading Strategy provides the ability to spot various peculiarities and patterns in price dynamics that are invisible to the naked eye.
Based on this information, traders can assume further price movements and adjust this strategy accordingly.
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How do I install the Donchian Trend Forex Trading Strategy?
- Download Donchian Trend Forex Trading Strategy.zip
- * Copy mq4 and ex4 files to your Metatrader directory / Experts / Indicators /
- Copy the tpl file (template) into your Metatrader directory / templates /
- Start or restart your Metatrader client
- Select the chart and timeframe in which you want to test your forex strategy
- Right click on your trading chart and hover over “Template”.
- Move right to select the Donchian Trend Forex Trading Strategy
- You will see that the Donchian Trend Forex Trading Strategy is available on your chart
* Note: Not all forex strategies come with mq4 / ex4 files. Some templates are already built into the MT4 indicators of the MetaTrader platform.
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