Turtletrader- Long-term Trend-Following

Discussion in 'Index Futures' started by J-Law, Oct 10, 2002.

  1. J-Law


    Hello everyone,

    This thread is exclusively devoted to the discussion of long-term trend-following, specifically that involving the turtle style of trading.

    So if anyone out there currently trades or papertrades the style wishes to chime in, & talk about your current tasks at hand:

    software choices
    ATR calculation
    entry signal selection
    exit signal selection
    money mgmt
    portfolio balancing
    open positions
    closed out positions
    rollover issues
    risk relative to account size....etc, etc.

    Good, bad or whatever....... feel free to do so.


  2. Southpaw


    My methodology is based mostly on the Turtle Trendfollowing system. However, I have made changes, for better or worse, and I have been profitable overall. I feel the core of Turtle Trading is money management. Also, be prepared to deal with drawdowns. Last year I was up 100% after 10 months then gave back half my gains in the last 2 months. I'm still trying to find a way to cut down on the drawdowns.

    I guess there are not many longer term traders on this board, as you did not get many responses.
  3. Guys,

    I am primarily a swing trader, but would prefer to trend follow when a trend is present. I have read a little bit about the turtle methodology, but would need to lear more before being able to evaluate it.

    Can you provide any information that I should look at?

  4. thought for sure the turtles original methods

    are no longer being used ... by its most successful
    traders ... those left from the
    original core group of 24 or so

    perhaps someone who has learned the hand
    me down basics from Russell or one of the others
    can briefly comment on their adaption of the rules
    to better fit the markets of the last few yrs.

    anyway ... I am now trying to learn about ACD's

    different rules , different master trader
  5. dottom


    I took the Russell Sands course about 10 or so years ago. Trend following is great if you have the capital to properly diversify. You'll catch big trends somewhere that will make up for your losses. For position trading with a long-term perspective it's a good overall method. You won't make 100% a year unless it's during some major trend period (but then most other methods should be making money too), but with proper diversification you should be able to consistently gain 20-30% per year. The drawdowns hurt and equity curve is not smooth. If you can consistently trade well via swing or day trading, you'll have a better overall Sharpe ratio, better peace of mind, and ultimately you should be able to compound your profits more quickly.

    But if your focus is long-term and you have the capital, the turtle method is as fundamental as the nature of trends in markets. If I ever "retire" from day trading, I'd likely adopt a long-term trend following method to make slow but on average beat the most fund managers over time.

    Diversification and sufficient capital is key to the success of this method. If you focus on two few markets you're too dependent on outliers. If you don't have enough capital you can't withstand the inevitable drawdowns.
  6. When it comes to big drawdowns I don't get it. Unless you place a trade and then go to Africa for a 6 month safari and have no way to check your trades, why suffer a big drawdown?

    Of course I am presuming that the drawdown comes from a few large losers since the thread is based on turtle-trading concepts and thus does not make a whole lot of trades.

    Turtle trading, it seems, nicely complements the "line in the sand" concept discussed on another thread. You are entering after certain criteria have been met. From that point forward either the trade is right or wrong. If the trade closes below the entry point get out!

    Let's not forget the logistics of the day when the Turtles were trading. The internet did not exist. As such, online brokerage, cheap commissions, and instant access did not exist. Data acquisition was expensive. None of this is so today.

    The cost of doing business is so cheap these days, especially for a turtle-style trader, that holding any loser beyond the first day that it is a loser is ludicrous. Get out. I'd bet that if a turtle-style trader reviews all the trades, he/she would find, whether it is a winner or loser, that the price did not go back and forth across the entry point, on a closing basis, over and over and over.
  7. J-Law


    The large drawdowns come from mainly having an open, profitable position and the market you're in starts to move against you and the system hasn't generated a liquidation signal.So you sit and watch profits evaporate.

    On top of that the system has a 30% hit rate. So you could sit thru 7 plus losers before you have a winner.

    When the two happen simultaneously, psychologically it can be difficult to endure.

    I know in daytrading, a day in which you have experienced a string of lossers without a winner is no day at the beach.

    Now picture this over the timeframe of months.
  8. Ouch another version of the double whammy! I have heard it purported often that the time to start a system is when it is in a losing streak.

    Still along the same thought however, on the 7 losers, do you have to take a big loss with each one? Or could you employ what I mentioned in my previous post?

    The reason I am curious is because my favorite method of trading is long term trend following. Much of my participation on ET is focused on the various aspects of it.

  9. J-Law


    The individual losses are small. Because one would be employing a money mgmt scheme, each trade may be a 2-3% risk of your entire account.

    So a string of losers, say 7 to 10 could be 14% to 20% of ones's account. On the other hand when you do get a winner is usually is a whammie. It could be on the order of 20% or more. Usually enough to clean up all the losses.

    The numbers are stacked in your favor. But like someone mentioned above, handling the drawdown maybe another story.
  10. Thanks J-law. I really can relate to your points.

    A somewhat ongoing discussion on ET is the importance of entry v exits. I am in the exits are the most important camp and deciding the method of exit, when to take profits, etc is tough I think. A stop loss exit for me is simple. But the profit exit is tough.

    I'm glad to see those loser exits are small... relative to the winners. I don't know if you are already trading the method, but if it were me... as if I know anything... I would wait for a string of losers and then jump in.

    #10     Oct 28, 2002