Thursday, January 11, 2007

Turtles – Again

The Turtles original method was based on Donchian channels. As I remember it they went long when the price went above the upper channel and short when it went below. Then they used risk management to keep them in the game. In other words if the stock kept running in their desired direction they stayed with it and if it came back the stop loss would take them out. They had many small losses and a few large wins and that’s what kept them solvent.

I wrote a filter using Donchian channels and set it up like the Turtles would have done – then I back tested it - I hate “many small losses.” I take enough as it is.

So I changed it – I set the filter to look for stocks that came back up through the lower Donchian channel after being below it for at least one close. This is what that looks like –

This output is actually for Wednesday's close - you can see that Glass responded well to the Donchian channel.

When I back tested it there were some absolutely great results. 62% win percentage and 75% annualized ROI. But the net change over time was where the real story was told – This has the potential to be a real intermediate (10 – 20 day) term filter.

NET Change
1 day - .04%
4 days – 1.07
10 days – 2.39
20 days – 4.33
30 days – 4.86

Donchian channels Marlyn’s way – it might be a winner.


boots said...

I love price channels and have used them for years in many different can build any number of methods using rule sets based just on the channels alone. Different settings automatically bring different S/R levels into play so you can combine them for entries, exits, drag stops along them, partial trades and qualify trades, Different lengths on a multiple of time frames can tell you most everything you need to know and provides an excellent frame work for a methods discipline.

Marlyn Trades said...

Back in the roaring '90's I used the channels quite extensively then got away from them - but back then I wasn't too much into experimentation.

For this post I used 20 period with a 4 period offset. I plan a series on them trying to document what happens with different periods and offsets, in mid-range, when breaking down through high range and so on.

You are welcome to comment any time.

Steven said...

This is getting good. I feel a review coming on soon. LOL.


Sometimes the markets very slow.