Richard D. Donchian (1905-1993) was an American commodities trader. He graduated from Yale with a BA in economics. In 1949, Richard Donchian started the first publicly managed futures fund, Futures Inc. Richard Donchian is credited with developing a systematic approach to futures money management and is considered to be the creator of the managed futures industry.
Richard D. Donchian (1934):
(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, ride profits – irrespective of all other rules. (4) Light commitments are advisable when a market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves to the virtual exclusion of others will prevent unprofitable “whipsawing.” (5) Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal. (6) Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses and to take positions from certain formations such as triangular foci. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation. (7) In a market in which upswings are likely to equal or exceed downswings, a heavier position should be taken for the upswings for percentage reasons – a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100%. (8) In taking a position, price orders are allowable. In closing a position, use “market” orders. (9) Buy strong acting, strong background commodities and sell weak ones, subject to all other rules. (10) Moves in which rails (now the Transportation Index) lead or participate strongly are usually worth following more than moves in which rails lag. (11-20) Article: 2 page pdf.