Richard D Donchian first published his ideas in 1934 to help stock market traders. Donchiian is one of the most respected technicians on wall street, specially in commodities.
General Guides
1. Beware of acting immediately on public opinion. Even if correct, it will usually delay the move.
2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
3. LIMIT LOSSES, ride profits – irrespective of all other rules.
4. Light positions are advisable when a market position is not certain. Clearly defined moves are made frequently enough to make life interesting, and concentration on these moves to the virtual exclusion of others will prevent unprofitable “whipsawing”.
5. Seldom take a position of an immediately preceding three day move. Wait for a one day reversal.
6. Judicious use of stop orders is a valuable aid to profitable trading. Stops may be sued to protect profits, limit losses and to take positions from certain formations such as triangles. Stop orders are apt to be less treacherous and more valuable if used in proper relation to the chart formation.
