The following is another amazing approach to utilize the Donchian channel indicator to ascertain the trend of a stock.

Richard Donchian invented this indicator in the late 1940s and this really has stood the test of time because of its weird accuracy.

I showed you previously how to get trading signals from the Donchian channel indicator with the middle line. Today I’m about to show you another impressive way to use this technical analysis tool.

Each time a stock touches the upper most band, that implies it is uptrending and you should buy. You hold that long position until it hits the lower band and then you sell.

When a stock touches the lower most band, that indicates it is downtrending and that you should short or stick to the sidelines. Now there are two different strategies you should use on when you should cover that short. You could keep the short until it hits the upper most band and then cover or you can keep the short position until the middle band is touched and then you cover.

I wish to reveal to you how correct this plan has been when applied to a rough market to trade like gold.

Virtually all experienced traders will tell you that gold is among the most challenging markets on earth to trade in. Gold has produced more liars from investors as well as Fox News celebrities like Peter Schiff and Glenn Beck than any human being could ever hope to do.

On April 5th, 2010 gold touched the upper Donchian wall which made a buy signal at $1128. This indicator said that market psychology had changed and that gold changed into an uptrend.

You’d have kept gold all the way until July 1st, 2010 when the lower wall was hit at $1214. This could have made you a 7% gain.

You now go short gold on July 1st at $1214 because this indicator has told you gold is in a downtrend. You hold this short position until the middle band is broke on August 3rd at $1190. This would have made you a 2% gain on the downside.

Now you are out of the market and you’re simply awaiting the price to strike the upper wall. It does so on August 12th 2010 at $1215. Gold is currently at $1224 so you are up in your position.

Inside the video tutorial below, I use this indicator on the gold market and teach you precisely how to profitably trade the rare metal. Remember that I am not a gold bug and I believe the most tempting but destructive things you can do to your trading account is to sign up for gold bug newsletters.

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