Articles - Snippits

In mid 1983, there was a debate between famous speculator Richard Dennis and his buddy Bill Eckihardt regarding whether great traders can be trained, or whether it is an innate ability. They decided to teach 13 beginners to trade, and if they can master the rules, fund them with trading accounts to settle the argumeof nature versus nurture. These beginners were called as "Turtles". Over next four years, the Turtles earned a collective compound rate of over 80% return. Turtle trading system was thus begun with settlement of the Argument.

The Turtles introduced the concept of "Volatility Normalization". In simple words, volatility normaliztion suggests that the more volatile an instrument, smaller is the trade. This means every instrument carries the same dollar risk. This is from where oft-repeated term *N, the 20 day exponential moving average of the ATR (true range) derives.

In the turtle trading system, the losses are taken seriously. Let us say, a turtle trader starts with a notional amount of $100 . In case, the trader looses $10 he would, normally, have $90 to manage future trades. However, in turtle trading system, the trader would have to manage the future trades with only $80 till he earns a profit of $10 to cover the loss.

Trading of Turtles are done under 20 day break out system as well as 55 day breakout system. One unit is bought or sold to start the system in 20 day break out system if the market is high or low through the 20 th day. If successful trade is manifested in the previous signals in the market, by passing the signal is best option 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!

The system is structured in such a way that there are constant losses which is offset by an occasional huge winner. However, it takes extraordinary will power to wait for the happening and if that is possible, then the turtles trading system will certainly work.