Richard Donchian

Richard Davoud Donchian (September 1905, in Hartford, Connecticut – April 24, 1993, in Fort Lauderdale, Florida) was an American commodities and futures trader, and a pioneer in the field of managed futures.

The first publicly managed futures fund, Futures, Inc., was started by Donchian in 1949. He also developed the trend timing method of futures investing and introduced the mutual fund concept to the field of money management.

Richard Donchian is considered to be the creator of the managed futures industry and is credited with developing a systematic approach to futures money management. His professional trading career was dedicated to advancing a more conservative approach to futures trading.

Biography

Donchian's parents were Armenian immigrants from Western Armenia, which was occupied by the Ottoman Empire in the 1880s, and had come to settle in the United States. As a young man Donchian went to school in Connecticut, later graduating from Yale University with a Bachelor of Arts degree in Economics. He later received his Master of Business Administration from MIT Sloan School of Management. Donchian's first taste of the job market was as an assistant in his family’s Oriental rug business.

During this time, Donchian came across the fictionalized biography of stock market whiz Jesse Livermore, titled ''Reminiscences of a Stock Operator''. After reading this book, Donchian became so fascinated that his interest turned to studying the financial markets. During the market crash of 1929 he lost some money. This experience led him to study technical analysis and become a student of price history alone and for its own sake.

Donchian began his Wall Street career in the 1930s. He published a very popular stock market service called ''Security Pilot'' which he sold to brokerage houses. During the summer of 1933 he became an account executive and securities analyst with Hemphill, Noyes and Co, while still working as the Vice President of the Samuel Rug Company.

World War II would take Richard Donchian into the US military and participation in the
invasion of Sicily. He was later promoted to Air Force statistical officer. After the war he became a private investment adviser and securities analyst. Richard was self-employed until 1960. In 1948, he changed his focus from securities analysis to active trading and developing his rule-based technical system. He established the trading firm ''Futures, Inc.'', which was one of the first publicly held commodity funds.

Donchian developed a rule-based trading approach which became known as Trend following. It is based on the assumption that commodity prices moved in long, sustained moves. He developed and used a trading system that incorporated ''Trading rules'', ''Trading guidelines'', and his ''weekly rule system'' based on moving averages. He wrote many articles on futures trading and securities and became known as "the Father of Trend Following".

In 1960, Donchian was appointed Director of Commodity Research with Hayden Stone, where he commenced writing a weekly newsletter, Commodity Trend Timing, based on his 5-20 moving average method. His newsletter was very popular, reaching a weekly circulation of some 10,000 copies during the 19 years he published it. He wrote numerous articles which are considered industry classics, including ''Trend Following Methods in Commodity Price Analysis''. Donchian would remain with Hayden Stone's various successors, including Shearson/American Express, and later joined Shearson Lehman Brothers
*Donchian channel

References

Richard Davoud Donchian Foundation WebsiteReferenced in booksRichard's 20 rulesReview: Donchian Channels

{{DEFAULTSORT:Donchian, Richard
1905 births
1993 deaths
American investors
Armenian businesspeople
Technical analysts
United States Army Air Forces personnel of World War II
American people of Armenian descent
Businesspeople from Hartford, Connecticut
Stock and commodity market managers
Yale College alumni
MIT Sloan School of Management alumni
20th-century American economists
20th-century American businesspeople