Have you ever heard of the legendary Turtle traders? Millionaire trader Richard Dennis set off to find out if traders were just born to trade, or if they could be trained to be successful in the markets from scratch. The answer? If they could follow rules they could be successful.
“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.” –Richard Dennis: Founder of the ‘Turtle Traders’ quoted from the book Market Wizards:
The Turtle system proved that the traders that followed the rules went on to be millionaires and to manage money professionally.
Markets – What to buy or sell
- The Turtles traded all major futures contracts, metals, currencies, and commodities.
- The turtles traded multiple markets to diversify risk.
Position Sizing – How much to buy or sell
- Turtle position sizing was based on a markets volatility using the 20 day exponential moving average of the true range.
- The Turtles were taught to trade in increments of 1% of total account equity,
Entries – When to buy or sell
- The Turtles traded a Donchian breakout system, System 1 entered a 20 day break out and System 2 entered a 55 day break out.
- Positions were added to in a winning trend. (Pyramiding)
Stops – When to get out of a losing position
- System 1 exited at a 10 day break out in the opposite direction of the entry and System 2 exited at 20 day break out in the opposite direction of the entry.
- No trade could incur more than a 2% equity risk, stop losses were planned accordingly
Tactics – How to buy or sell
- The most important aspects of successful trading is confidence, consistency, and discipline.
- The Turtles believed that successful traders used mechanical trading systems.
- They traded liquid markets only.
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It was truly a landmark experiment in trend following success rates, and gives readers a glimpse into the real life strategies of successful traders.