Way of the turtle

139
0.64
0.66
0.68
0.70
0.72
0.74
0.76
CD: FX-Canadian Dollar-CME
Jul 20
03
Jun 2003
May 20
03
Apr 2003
Mar 2003
Figure 10-3
Donchian Trend System
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The smooth line that follows the prices fairly closely is the short
moving average; the lower smooth line at the bottom is the long
moving average. The graph indicates that a long-trend is in
progress, and so only long trades will be taken. The jagged lines at
the top and bottom of the prices are the breakout levels. The high-
est high moves directly as a new high is made, and so it closely fol-
lows the price on the way up. Note that the lowest low does not
follow the price as closely as the price moves up. 
The chart shows that a long trade would have been entered on
April 10 as the price penetrated the former highest high at 0.6802,
which had been made on March 7. Note too how a previous
attempt to exceed that price at the end of March was unsuccess-
ful. This is a good example of resistance indicating selling. The
second time the price rose to that level, it was able to break
through and rally 6 cents to 0.74 without any significant pullbacks.
The price was able to rise because there were no more traders will-
ing to sell at that level but there were buyers willing to buy at the
higher prices.
Donchian Trend with Time Exit
A variation on the Donchian Trend system, the Donchian Trend
with Time Exit system, uses a time-based exit instead of a breakout
exit. It exits the trade after 80 days and does not use any stops what-
soever. There are many traders who state that entries do not mat-
ter; only exits do. This system is my response to that statement.
When we compare the performance of this system with that of the
other systems, you will be able to see how this very simple exit com-
pares with more sophisticated exits.