Brent Elam of Elam Management Corp. had this to say about Donchian’s students:

“I remember in 1979 or 1980 at one of the early MAR conferences being impressed by the fact that I counted 19 CTAs who were managing public funds, and I could directly identify 16 of the 19 with Dick Donchian. They had either worked for him or had had monies invested with him. To me, that’s the best evidence of his impact in the early days. Dick has always been very proud of the fact that his people have prospered. He also was proud that after so many years in which his was the lone voice in the wilderness, his thinking eventually came to be the dominant thinking of the industry.”

Richard Donchian is known as the father of trend following. His original trend following ideas form the basis for all trend following success that has followed, including Richard Dennis. Donchian’s original methods involved the use of a moving average for the entry/exit indicator portion of his system. Of course, he knew that money management was still the majority of any Trend Followers’ success in the market. Richard Dennis, however, did not use a moving average for entry/exit and concentrated even more heavily on money management than Donchian.

Donchian and his Students

Richard Donchian, though now deceased, left many students that still trade or run money management firms. A sampling of his students include:

• Nelson Chang worked for Donchian: Started Chang-Crowell Corp.
• Robert Crowell worked for Donchian: Started Chang-Crowell Corp.
• Barbara Dixon worked for Donchian: Started Spackenkill Trading
• Bruce Terry worked for Chang-Crowell Corp.

What’s the point? Trading as a trend follower is a learned behavior. Not everyone is going to trade this way. Most people want no more complexity in their life than to buy and hold. Most people don’t want to think or learn about new methods. It takes discipline. But, if the students of Richard Dennis or the students of Richard Donchian don’t provide inspiration as to how important learning the right method is toward achieving success…well buy a mutual fund and shoot for 12% a year.

What 16 of 19 Means for the History of Systematic Trading

Elam’s count at the 1979-1980 MAR conference is the most concrete available measure of Donchian’s institutional influence at the moment the managed futures industry was first organizing itself as a distinct asset class. Sixteen of nineteen public fund managers could be traced directly to a single practitioner. The industry’s dominant methodology at its founding was not the product of many independent discoveries. It was the product of one person teaching a framework to a generation of practitioners who then built independent firms applying variations of that framework.

The “lone voice in the wilderness” description captures the decades Donchian spent developing and advocating for systematic price-based trading before the institutional infrastructure existed to implement it at scale. He developed the moving average system and the Donchian Channel breakout in the 1950s and 1960s, during a period when commodity trading was dominated by fundamental analysis and floor trading. His approach was counterintuitive and unpopular. It took decades for the institutional commodity trading infrastructure to develop to the point where systematic approaches could be implemented across multiple markets simultaneously with sufficient capital to produce the returns the approach generates.

The comparison between Donchian’s moving average approach and Dennis’s breakout approach is significant. Both are price-reactive. Both define entry and exit based on observable price data rather than on fundamental analysis. But Donchian concentrated primary importance on money management from the beginning, and Dennis concentrated even more heavily on it than Donchian did. This sequence, from Donchian to Dennis to the Turtles, represents not the discovery of a new approach but the progressive refinement of the same approach with increasing precision on the position sizing and risk management components that determine long-run performance.

Barbara Dixon’s profile on TurtleTrader documents her contributions to the systematic trading literature in her own right, particularly on system design, curve fitting avoidance, and handling unexpected events. Her lineage from Donchian’s direct instruction is the confirmation that the written principles she articulated in 1974 came from the same source as the rules that eventually became the Turtle system.

Frequently Asked Questions

Why is Richard Donchian called the father of trend following?

Because he developed the foundational systematic price-based trading frameworks that all subsequent trend following approaches are built on: the moving average system, the Donchian Channel breakout, and the emphasis on money management as the primary determinant of long-run trading performance. Brent Elam’s count at the 1979-1980 MAR conference, 16 of 19 public fund managers traceable to Donchian, demonstrates his institutional influence at the moment the managed futures industry first organized as a distinct asset class.

How did Dennis’s approach differ from Donchian’s?

Dennis used price breakouts as entry signals rather than moving average crossovers, which Donchian had used. More significantly, Dennis concentrated even more heavily on money management than Donchian did, developing the volatility-normalized position sizing framework that became the core of the Turtle system. Both approaches are price-reactive rather than predictive, but Dennis’s refinement of the position sizing component is the specific contribution that distinguishes the Turtle approach from its Donchian-based predecessors.

What is the lesson of Donchian’s students becoming 16 of 19 early CTAs?

That systematic trend following is a teachable skill, and that the quality of the instruction matters enormously. Sixteen of the nineteen public fund managers at the 1980 MAR conference came from a single teacher. The same pattern repeats with the Turtles: 20 students trained by Dennis went on to collectively manage billions of dollars. The approach can be taught. The students of good instructors produce better results than those who develop the approach independently. Learning the right method from practitioners who have already validated it is the most efficient path.

Trend Following Systems
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