Donchian Breakout Strategy
Today, we backtest a classic Donchian Breakout Strategy. This is a trend-following approach designed to capture strong price moves as they break beyond recent highs or lows.
By using Donchian Channels to identify potential breakout points, the strategy aims to enter emerging trends and stay with them while momentum continues.
Donchian Breakout Strategy
We backtested the trading rules on the following ETFs:
SPY: US stocks
EFA: International developed stocks ex. USA.
EEM: Emerging markets stocks
GLD: Gold
TLT: US long-term bonds
DBC: Commodities
From 2004, we get the following result (monthly bars):
Performance
No. of trades: 78
Average gain per trade: 4.9%
Win ratio: 51%
Profit Factor: 2.7
Annual returns (CAGR): 7.5%
Exposure/time in the market: 72%
Risk-adjusted return: 10.3% (CAGR divided by time spent in the market (0.72))
Max drawdown: -18%
Trading Rules
We have the full code for this strategy for TradingView, Python, Metatrader, Ninjatrader, Tradestation, and Amibroker on our website - Platinum/Annual membership:
We made the following trading rules:
