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BEST Donchian Channels Trading Strategy EVER tested 100 TIMES so you can Make Money as a Day Trader - YouTube
Channel: TRADING RUSH
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Does Donchian Channels trading strategy even
work?
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Can this popular strategy make you money in
trading?
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Well, I took 100 trades with Donchian Channels
Indicator to find just that.
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In this video, you will learn about the Donchian
Channels trading strategy with its win rate,
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so we all can see if this indicator is good
or not.
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Since the Bollinger Bands trading strategy
had the second highest win rate in this series,
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and since the Donchian Channel indicator is
very similar to the bollinger bands, it will
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be interesting to see if the Donchian Channels
trading strategy can surpass the bollinger
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bands strategy.
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If it does, we will have a new second best
indicator in this series.
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If you don't know what I'm talking about,
On the Trading Rush channel, we have tested
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many different trading strategies 100 times
to find their real win rates.
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Check them out if you want.
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Also if you are new to trading, don't forget
to subscribe to the Trading Rush Channel,
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after all you don't want to risk your real
money on a indicator, that doesn't even work.
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This is what the Donchian Channels indicator
looks like on Trading View.
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It will come with 3 lines, and they are called
the upper band, the basis, and the lower bands
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respectively.
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Even though this indicator looks like a bollinger
band, the trading strategy is quite different.
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The Donchian Channels indicator is used to
find the trend, so the popular trading strategy
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based around it, is a trend following strategy.
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When there is an uptrend going on, the upper
and lower bands of the Donchian Channels,
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will make higher highs and higher lows.
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Similarly, when a down trend is going on,
the upper and lower bands of the Donchian
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Channels, will make lower highs and lower
lows.
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Now the basic Donchian Channels strategy goes
something like this.
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You buy, when the upper band of the Donchian
Channels makes a new higher high, after making
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lower lows.
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Similarly, you sell, when the lower band of
the Donchian Channels makes a new lower low,
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after making higher highs.
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Now there are a lot of problems with this
basic setup.
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So to make this indicator even more effective,
I have modified the strategy a little bit
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by adding few more rules.
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Also remember, the 100 times tested data you
are about to see, is based on this modified
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strategy.
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Here's how the modified and better Donchian
Channels strategy goes.
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To filter false signals given by the Donchian
Channels, I have used the 200 period moving
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average.
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If price is above the moving average, we will
only take buy signals given by the Donchian
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Channels. and if price is below it, we will
only take sell entry signals.
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Furthermore, in the new modified setup.
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the long entry signal is when, the upper band
makes a new higher high, after lower band
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had made a lower low.
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Since in an uptrend, price rarely crosses
below the lower Donchian Channels band, set
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your stoploss just below the lower band.
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Similarly, when the lower Donchian Channels
band, makes a new lower low, after upper band
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had made a higher high, it is a sell signal.
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Set your stoploss, just above the upper band.
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So, I tested Donchian Channels trading strategy
100 times using this modified setup, here's
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what happened.
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Number 1.
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Since we used the 200 period moving average
to find the long term trend, on an indicator
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that is already a trend following indicator,
the end results were looking very promising,
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that's because in the beginning, the profit
graph in the Trading Rush App was going almost
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straight up.
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The only time I remember the profit graph
and win rate going this high at the start,
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was when I tested the MACD strategy.
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MACD strategy was the best performing trading
strategy we have tested on this channel, and
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it was looking like the Donchian Channels
was going to surpass it.
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By the way, I'm using the Official Trading聽
Rush App for backtesting.
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You can use it to test your trading strategy
as well.
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It will calculate profit graph, win rate and
other useful data in just one click.
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Saves a lot of time.
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You can download it from the Play Store, or
using the link in the description.
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Number 2.
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Another thing I noticed that was pretty interesting,
was the stoploss.
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The stoploss that was set using the upper
and lower bands of the Donchian Channels,
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was actually at a good enough distance.
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It was not easily hit by small price movements,
and it also gave a decent reward to risk ratio.
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Now obviously, I have used a fixed stoploss
and profit target while back testing, because
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we have tested all other strategies the same
way on the 30 minutes timeframe.
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But since, this is a trend following strategy,
you can use a trailing stoploss if you are
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a trader that likes to catch the big moves.
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Just remember that the win rate you will get
will be different than what I got here.
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When there is a trend going on, the price
is rarely touch the lower band of the Donchian
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Channels.
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Furthermore, in a strong uptrend, the lower
Donchian Channels band keeps making higher
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lows.
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So if you want to trail the stoploss only
using the Donchian Channels, you can use the
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lower band.
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Just set the stoploss below the lower band,
and trail it as the band moves higher.
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Similar thing applies in a down trend.
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If you want to trail the stoploss in a down
trend, set it above the upper Donchian Channels
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band, and trail it as the band moves lower.
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Due to a sudden or bigger price movement,
if the entry and stoploss according to the
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Donchian Channels strategy, are far away from
each other, you can simply skip that trade.
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Otherwise the probability of getting a better
reward to risk ratio will be a little bit
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low.
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Number 3.
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To be honest, this is one of the better indicators
we have tested on this channel.
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Unlike other indicators, that were showing
multiple problems while testing, this indicator
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is works perfectly with the modified trading
strategy we created in this video.
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Since it shows where to set the stoploss,
and also shows the direction of the trend,
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it can be easily picked by most new traders.
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So, the win rate I got after testing the Donchian
Channels trading strategy 100 times, was approximately
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58 percent.
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Which is one of the best win rates we have
gotten on the Trading Rush Channel.
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The bollinger bands trading strategy had an
approximate win rate of 55 percent.
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So this strategy is not bad at all.
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The Donchian Channels strategy is a profitable
strategy.
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As you can see in the Trading Rush app, I
lost 42 trades, and won 58 trades.
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Since I was using a 1.5 to 1 reward risk ratio,
the account was up by 4500.
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The profit graph in this example looks much
better when compared to some other indicators
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we have tested so far.
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The maximum number of winners I had, were
6, and max number of losing trades were 7.
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But in the end, the Donchian Channels trading
strategy, turned out to be one of the best
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trading strategies, that we have tested in
the strategies tested 100 times series.
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Like the video if you liked it.
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If you want to see other trading strategies
tested 100 times to find their win rates,
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Subscribe to the Trading Rush Channel and
ring that notification bell.
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After all, you don't want to trade using a
strategy that doesn't even make money.
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Also, don't forget to check out the Official
Trading Rush app.
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Thanks a lot for watching, and special thanks
to all the Patrons who make these videos possible,聽
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by supporting the Trading Rush Channel on
Patreon.
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Thanks a lot.
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