Donchian's 20 Guides to Trade Commodities

Dear all reader,

Are you a trader? If you are a trader, are you trade commodity? If yes, then this guide for all of you written by Richard D. Donchian in 1934 to help stock market trades.

Donchian is one of the most respected technicians on Wall Street especially in commodities. This guide is divide by two; General Guides and Technical Guides.

General Guides

1. Beware of acting immediately on widespread public opinion. Even if correct, it will usually delay the move.
2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
3. LIMIT LOSSES
4. Light commitments are advisable when a market position is not certain to prevent unprofitable "whipsawing".
5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for one-day reversal.
6. Judicious use of stop orders to protect profits, to limit losses and to take position.
7. In a market in which upswing are likely, a heavier position should be taken for the upswings for some reasons.
8. In taking a position, price orders are allowable. In closing position, use market orders.
9. Buy strong acting, strong background commodities and sell weak ones.
10. Moves in which rails (now the Transportation Index) lead or participate strongly are usually worth following more.
11. A study of the capitalization of a company is fully as important as a study of statistical reports.

Technical Guides

1. A move followed by a sideways range often precedes another move of almost equal extent n same direction as original move.
2. Reversal or resistance to a move is likely to be encountered on reaching levels at which the commodity has fluctuated for a considerable length of time within a narrow range in the past or on approaching previous high/low.
3. Watch for good buying or selling opportunities when trend lines are approached especially on medium or dull volume. Be sure such line has not been hugged or hit too frequent.
4. Watch for "crawling along" or repeated bumping of minor or major trend lines and prepare to see such trend lines broken.
5. Breaking of minor trend lines counter to the major trend gives most other important position-taking signals. Position can be taken or reversed on stops at such places.
6. Triangle of either slope may mean either accumulation or distribution, depending on other considerations, although triangles are usually broken on the flat side.
7. Watch for volume climax, especially after a long move.
8. Don't count on gaps being closed unless you can distinguish between breakaway gaps, normal gaps, and exhaustion gaps.
9. During a move, take take or increase positions in the direction of the move at the market.

Thats all for the tips for all commodities traders.

Thank you and hope all of you enjoy this! Do you have any other guidelines or tips? Please share at comment section 😊