Donchian Channel Breakouts with Risk-Based Position Sizing

Summary

This trend-following approach places stop entries just beyond the previous Donchian channel boundaries, calculated from the highest high and lowest low over a lookback period. The published setting uses 60 bars. A breakout above the upper boundary triggers a long entry, while a break below the lower boundary triggers a short entry. The source also describes sizing positions using account equity, an ATR-based risk distance, maximum risk, exposure, and margin settings.

The accompanying discussion proposes a one-tick stop and channel re-entry as an exit, but the supplied strategy source does not implement those exit rules: its close-all condition is tied to a trade window that is always enabled. No performance results are reported. The text warns that tight stops may be hit by ordinary price swings and that poorly chosen channel lengths can increase false breakouts. It suggests trailing or dual-channel exits and volume or volatility filters, but does not evaluate them.

Key ideas

• The strategy uses prior-period Donchian highs and lows to set stop-entry levels for breakouts.
• The published channel lookback is 60 bars, and entries are placed one minimum tick beyond the bands.
• Position sizing can use ATR-based trade risk alongside limits on account risk and exposure.
• The prose describes stop and channel-based exits that are absent from the supplied strategy source.
• No backtest performance results are provided, and false breakouts remain a stated risk.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.