Turtle Trading

Discussion in 'Technical Analysis' started by skiabox, Mar 12, 2003.

  1. skiabox


    While surfing I came uppon this article :

    Turtle Trading

    By Chris Tate

    The Turtles are one of the most successful groups of traders that the world has ever seen. The group was formed due to a bet between two very profitable traders, Bill Eckhardt and Richard Dennis. Dennis was convinced that trading was a skill and could be taught, so he set out to prove his assertions. He chose a variety of different people from all walks of life who responded to a newspaper advertisement. Only about 50% of this original group continued trading. The others quit. They could not follow the simple trading system set out for them due some form of psychological resistance. The group is called the ‘Turtles’ because less than 50% of the wild turtles actually make it to the ocean to have a chance at survival to adulthood. 50% die on their way to the ocean from predators or other dangers.

    The Turtles consistently derive annual returns in excess of 70%, yet their trading system only produces correct entry signals 35% of the time. The probability of a ‘win’ is insignificant when you consider the importance of the size of your wins compared to the size of your losses. Here is a summary of how their system works:

    Entry rules
    1. Get in on a 20-bar breakout.
    2. Before reversing the trend using the 20-bar breakout, there must be a losing trade in the opposite direction.
    3. Always enter on a 55 bar breakout.
    4. (Subjective) If the market is sideways, use a 55 bar breakout.
    5. Once there is a profit in one direction, you can continue to trade in that direction, but to trade in the opposite direction, there must first be a loss.

    Stop rules
    1. On the day of entry, use a 1/2 (Average True Range) ATR stop. If the trade gets stopped out during the intraday trading, then get back in if the intraday market gives a new signal (makes new lows or highs).
    2. Use a 10-day trailing stop.
    3. The day after the entry, use a 2 ATR protective stop. Sometimes the 10 day trailing stop is too far away. The 10-day trailing stop assures you will not be risking more than 2-ATR on a trade (except when there is a gap open against your trade).
    4. When the trade is at a 2.5 ATR profit, move the protective stop to breakeven.
    5. Once the 10-day trailing stop or the 2.5 ATR rule moves the stop to breakeven, start using a wider trailing stop of 20 bars.
    6. Once you are ahead by 10 ATR, use a 3 bar pivot as a trailing stop and the 20 bar breakout as a trailing stop.

    Additional Techniques
    1. Enter additional positions at a 55-day breakout, provided the protective stop on the first positions have been moved to breakeven.
    2. After a big profit of 10 ATR or more, do not trade in the opposite direction for 45 bars using the 20 bar breakout method. Use the 55 bar breakout instead.
    3. Wait for a sideways market to start trading and get in on a 55 bar breakout.

    Money Management Rules

    1. Do not risk more than 1% of your account per trade.
    2. Do not expose your account to more than a 2 ATR risk at any time.
    3. Use fractional entry technique.
    4. If in one trade, wait for that trade to be moved to breakeven before adding any new trades.
    5. Trade the strongest commodity within a complex, such as grains and currencies.
    6. Trade when the volatility shrinks. When the volatility shrinks by 50%, it allows more contracts to be used for the same dollar risk.

    ....has anyone ever traded these rules?
  2. Yes I have.. That methodology is the holy grail.

    I have made millions trading it.

  3. Turtle trading is what I call the market action so far this morning.
  4. With all honesty... the only thing I trade w/ based on those rules is only betting %1 of portfolio per a trade. And using ATR as a stop or tralingstop... is a sound idea..

  5. Momento


    This sounds like a good TV commercial...

    "Introducing TURTLE TRADING! ...
    and now, let's hear what our previous users got to say."

    "Yah i have had great success using this package. At first i was very pessimistic about the program, but i later found out that; Hey making money in the market is really not that hard? You have got to try this folks."

  6. Somehow I doubt a guy with the handle Trendfader uses the turtle system.
  7. There are a lot of trend following techniques. They all are pretty similar in that you get in on a breakout or pullback and hold as long as you can. It would be relatively easy for someone to program this system into WL or TS and run it. They all seem to generate about 30-35% winners, decent profits and huge drawdowns with strings of losers, when traded across a portfolio of commodities. Probably most of the CTA programs use them, often using several systems with different timeframes or perhaps a countertrend system to soften the drawdowns.

    Historically they have done best on markets which tend to go on long trend runs like the currencies, and worse on back and fill markets like stcok indexes. I know Linda Bradford Raschke advises newbies to trade a vol breakout system for a while to get a feel for how markets move. Probably that is not bad advice.

    The attraction of these systems is they are proven winners over time. the disadvantage is they take a big account and plenty of discipline to trade.
  8. links

    links Guest

    imho this is totally a useless system for us individual traders. This may make sense for large funds who have the resources and employees to monitor 30 mkts around the world and are able to live with 30 - 40% drawdowns.

    If an individual trader was using this system and somehow didn't fully exploit the explosive move in Crude Oil, Gold you are pretty much screwed for 2003...imagine that if you were on vacation when oil/gold started moving and didn't particiapte, it would be very hard to recover. I rather make a dozen mistakes a month and still have some chance to recover from my blunders.

    All that remains in the mystique of the great Richard Dennis...
  9. I agree, it was an experiment to enlarge a trading operation of professionals. The qualifying for a position was not a simple one I have read. the manner of continuing the experiment was less than scientific at best.

    The key to making it with any approach is to go from level to level of additional improvements in a profound climate of prior sucess.

    Over the years I have canned what I do. Now, at this age I am gleening through stuff and setting up my final work spaces. The transference of any method, subject to the technology available at the time, is an interesting one.....

    As I see it, even the paradigms for either equities or commodities (and they have a terrific overlap and common ground) have not changed much over time. People's resoning and performance seem to remain fairly constant as well.

    I finally the first time in my life, have my paradigms written out as comprehensive notes, flow charts, or floppy software and in adjacent file cabinets and I have reduced much of my backup to under two rooms of boxes. Where does all the dust come from anyway. LOL.
  10. Did you ever wonder why the progression of trading cycles is linked in any way at all? Strange to get to that place.

    Prediction seems to run a close second to the linking of trades as a strategy.

    When a person looks into a market, all there is is people and product. Wouldn't it be funny if warehousers operated like these guys do?
    #10     Mar 12, 2003