Kısa-Vade-Al-Sat Donchian’s Four-Week Rule

What do Point & Figure charts, Kagi charts, Renko charts, Filtered Waves, and Zig Zag have in common? They are all related to swing charting in some way. Swing charting follows a simple concept: additional information to the chart is made when a new price swing penetrates the level of the prior swing in the same direction. The basis of this type of charting is the filter. Once prices have moved by the distance specified by this filter, a new line is drawn next to the previous one. In a nutshell, it is a chart that shows up and down price movement of a minimum size regardless of the time it takes.

Another concept of swing charts is that it works similarly to a breakout system. A new high made after so many days is a buy signal and a sell signal occurs when a new low is made after so many days. This has been written about for years, by Gann, Merrill, Livermore, Donchian, Hochheimer, Wilder, and Keltner, to name a few. They all used some form of swing charting.

Many swing based systems use volatility as the basis for determining the parameters to use for determining the swing filter. This way, as the current volatility increases, the number of days used in the calculation of the swing filter decreases.

On of the more simple swing systems was Donchian’s Four-Week Rule. Buy when the current price goes above the highs of the previous 4 full weeks. Sell (go short) when the price falls below the lows of the previous 4 full weeks. That’s it. Guess what? In 1970, Dunn and Hargitt Financial Services rated it as the best of the popular systems of the day.

There are a host of different swing charting techniques. Some use 3 consecutive new highs as an up move and will remain as such until 3 consecutive new lows. The list is endless, but the concept is the same.

The Donchian Channel indicator is simply a marker of the highest high in the last few points, and the lowest low in the last few points. The centerline is a simple average of the two. Typically, 20 points are used. This indicator is useful as previous highs and lows typically offer significant resistance to further price movement.
In MetaStock the formula you would have to use is:
HHV(H,20);
LLV(L,20);
Mov((HHV(H,20) + LLV(L,20))/2,20,S)
Metastock Indicators/Exploration/Expert
Create these two Indicator in indicator builder
Donchian Channel :
upch:= Ref(HHV(H,20),-1);
dnch:= Ref(LLV(L,20),-1);
midch:=(upch+dnch)/2;
upch;dnch;midch
Donchian Midchannel :
upch:= Ref(HHV(H,20),-1);
dnch:= Ref(LLV(L,20),-1);
midch:=(upch+dnch)/2;
midch
——————————————————————————
Exploration Donchian midpoint crossover :
Column A : Bullish
C>(Fml( “Donchian Midchannel”) AND Ref(C,-1)<
Ref(Fml( “Donchian Midchannel”)-1)
Column B : Bearish
C<(Fml( “Donchian Midchannel”) AND Ref(C,-1)>
Ref(Fml( “Donchian Midchannel”)-1)
Filter : Column A =1 OR Column B =1
The formula for crossover needs one more condition and that is last candle should cross the high of previous one for bullish signal and for bearish it should cross the previous low on downside.

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CREATE NEW EXPERT ADVISOR AS CHANNEL SIGNALS
UNDER SYMBOLS –
BUY
C>(Fml( “Donchian Midchannel”) AND Ref(C,-1)<
Ref(Fml( “Donchian Midchannel”)-1)
SELL
C<(Fml( “Donchian Midchannel”) AND Ref(C,-1)>
Ref(Fml( “Donchian Midchannel”)-1)


Source:
indiansharetraders