Turtles Trading System And The Way Turtles Make Money By Rules
In Mid 1983 the Famous speculator Richard Dennis argues with his buddy Bill Eckhardt about whether great traders can be trained, or whether it is an innate ability. To settle the argument of nature versus nurture, they decided to teach 13 beginners to trade, and if they can master the rules, fund them with trading accounts. These beginners are known as the ‘Turtles’. Over the next four years, the Turtles earned a collective compound rate of return of over 80%. Argument settled and Turtles trading system started.
The Turtles used ‘Volatility normalization’ - a fancy way of saying that the more volatile an instrument, the smaller the trade, meaning that every instrument would (hopefully) carry the same dollar risk.This is where the much-talked-about ‘N’ comes from.’N’ is the 20-day exponential moving average of the ATR (true range).
The working of turtles ‘notional’ accounts needs to be understood properly. It means that if a 10% loss happens with the initial amount, then the effective trading amount available for the trader would be reduced by 20%. To illustrate, if the initial amount is $1,000,000, then a 10% loss would leave the trader to trade with $800 and not $100.
Turtle trading system is based on two models. one being a 20 day breakout system and the other one is 55 day breakout system. If the market opened thru the 20 day hi9gh or low, or traded during the day, that would be singnal to enter. One unit would be bought /sold to initiate the position. However, previous singal would have resulted in a successful trade, this signal would be ingnored in an attempt to avoid whipsawing.
The Turtles trading system would add a single Unit for every 1/2′N’ advance once in position. This would be incremented up to the maximum permitted number of units. That is; 4 in a single instrument, 6 in ‘Closely Correlated’ markets (such as oil and crude), 10 units in ‘Loosely Correlated markets and 12 units overall in one direction - CONSISTENCY being the prime directive in all of this. Since most of the trades failed, it was very important to be in ALL of them, otherwise you would miss those few winners which made a huge profit!
Though it requires iron willpower to follow the rules, and not mere try and bend the mechanics of the strategy, the Turtle trading system undoubtedly works. Most people are mentally not equipped to deal with constant losses, though they are handsomely offset by the occasional huge winner.
IN 1983 AFTER HAVING ARGUMENT WITH HIS FRIEND,RICHARD DENNIS DECIDED TO TEACH TRADE TO 13 BEGINNERS AND NAMED THEM TURTLES.HE WAS SUCESSFUL IN MAKING THEM MASTER IN TRADING AND MAKING A PROFIT IN EXCESS OVER 80%.THIS IS HOW TURTLES TRADING SYSTEM STARTED.IN THIS SYSTEM THE LOSSES ARE TAKEN VERY SERIOUSLY.THIS WAS BASED ON 2 DIFFERENT APPROCHES 20 DAY BREAKOUT AND 50 DAY BREAKOUT.ACCORDING TOTHAT,THE TRADING WAS DONE FOR 20 DAYS,THE STOCKS WERE PURCHASED OR SOLD AT PROFITS. THIS SYSTEM HELPEDTHE TRADERS EARNING HUGE PROFITSWHO FOLLOWED THE RULES AND WERE PATIENT AT THE TIME OF LOSSES
- Mark Crisp
