Donchian Channel Indicator Helps Determine The Trend

Here is a different unbelievable strategy to utilize the Donchian channel indicator to discover the trend of a stock.

Richard Donchian invented this indicator in the late 1940s and it really has stood the test of time on account of its spooky accuracy and reliability.

I showed you before the way to get trading signals from the Donchian channel indicator using the middle line. Now I am going to show you another impressive way to make use of this technical analysis tool.

Each time a stock touches the upper most band, that implies it is uptrending so you should buy. You keep that long until it touches the lower band and then you sell.

Each time a stock hits the lower most band, that means it is downtrending and you should short or stay on the sidelines. Now there’s two different approaches you should use on when to cover that short. You can hold the short until it touches the upper most band after which cover or else you can hold until the middle band is hit and then you cover.

I wish to explain to you how accurate this strategy is when employed on a rough market to trade like gold.

The majority of professional traders will tell you that gold is among the most difficult markets in the world to trade in. Gold has made more liars from investors as well as Fox News personalities like Peter Schiff and Glenn Beck than any human being could ever aspire to do.

On April 5th, 2010 gold hit the upper Donchian wall which produced a buy signal at $1129. This indicator said that market psychology had changed and that gold changed into an uptrend.

You should have kept gold all the way until July 1st, 2010 when the lower wall was hit at $1214. This would have made you a 7% gain.

You now go short gold on July 1st at $1214 because this indicator has told you gold is in a downtrend. You hold this short position until the middle band is broke on August 3rd at $1190. This could have made you a 2% gain on the downside.

Now you are out from the market and you are watching for the price to hit the upper wall. It does so on August 12th 2010 at $1215. Gold is currently at $1224 so you are up in your position.

In the video tutorial below, I apply this indicator to the gold market and teach you just how to profitably trade the precious metal. Understand that I am not a gold bug and I do believe probably the most luring but destructive things you can do to your trading account is to sign up to gold bug newsletters.

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