The The Donchian Trading System Improvement And Optimization

The success of an investment decision relies upon the solution of three issues: entry price, exit price and capital management. The systematic trading becomes popular for the reason that it provides a whole set of solution to these issues. With the development of financial markets, systematic trading already becomes the mainstream investment method in the west. We could anticipate that it will also have a huge development opportunity in China in the future. Therefore, it is necessary to conduct a research into systematic trading.There are different ways to establish a trading strategy. This article studied the famous technical trading strategy, the Donchian's channel breakout system. But after some tests, it is found that it could not produce stable profit in China's futures markets. Then I analyzed its working mechanism, and made three improvements. First, I make it more sensitive to the reverse of the trend, so that reduce the loss when reverse. Second, I made the entry price another parameter of the system to make it less risky when there is no trend. Last, I use open price as the indicator, so that the system is more practical. Then new system was put into tests on different markets, and showed great performance in these tests.We could anticipate that at a time when systematic trading methods are used with large scale in financial markets, systematic trading not only changed the investment behavior, but also influenced the market structure, and gived rise to some new problems to the market regulation.