Turtle Trading

Well, let’s time warp back to 1983 when to commodity traders named Richard Dennis and William Eckhardt decided that the value of turtles changed over time so you could trade them to other people….Just Kidding!

Actually they decided to conduct an experiment to prove they could teach people with no trading experience how to be profitable traders if they were given a set of rules to follow.

Richard Dennis called them “turtle” traders because he had visited a turtle farm in Singapore and thought he could “grow” traders the same way.

The “Turtles” where taught how to implement a trend-following strategy. They were taught to buy futures breaking the upside of the trend and sell on downside breakouts.

There were 2 systems based on either a 20 day or 55 day breakout.

So what are the rules of Turtle trading?

  1. Enter long/short when the price goes over/below the high/low of the preceding 20 days by even a single tick. For the 55 day system you would use the 55 days instead of 20.
  2. Breakout entry signals were ignored if the last signal was profitable.
  3. Initial stop was never more than 2% of the account and based on the 20 day exponential moving average of the True Range.
  4. Exits for the 20 day system was a 10 day low/high break.
  5. Exits for the 55 day system was a 20 day low/high break.

I have really over simplified these rules to keep this post to a blog instead of a book. Keep reading and I will let you know how to learn the complete strategy.

The key to this type of trading is to find and get into the longer term trends. That means you cannot just trade one or two instruments. The original turtles traded multiple instruments at the same time, looking for that long term trend in one of them.

Where the successful? Short answer is yes, but that is not to say this is a good strategy for everyone. Also, keep in mind the key is getting into the trend. If you are unlucky and miss all the trends you can easily blow an account.

Also this type of strategy can incur some heavy draw downs even if it is ultimately successful.

If you want to know more, I suggest this book: Way of the Turtle by Curtis M. Faith.

Leave a Reply

Your email address will not be published. Required fields are marked *