Swimming with Turtles: Lessons from a Legendary Trading System

Unleashing the Power of Persistence: The Turtle Trading System Explained

In the world of trading, few systems have achieved the legendary status of the Turtle Trading System. Born out of a famous experiment conducted by commodities trader Richard Dennis in the 1980s, this method has since become a cornerstone of trend-following strategies. Let’s delve into the principles behind the Turtle Trading System and why it remains relevant for modern traders.

Origins of the Turtle Trading System

In 1983, Richard Dennis and Bill Eckhardt made a bet regarding the nature of successful trading. Dennis believed that he could teach anyone his trading principles and turn them into successful traders. To test this hypothesis, he recruited a group of individuals with diverse backgrounds and trained them in his methods. These trainees were dubbed “Turtles” because Dennis joked that he could turn even turtles into traders.

Over the next few years, the Turtles achieved remarkable success, generating impressive returns in various markets. Their methods were eventually published and have since been adopted by traders around the globe.

Core Principles of the Turtle Trading System

The Turtle Trading System is built upon several key principles that emphasize disciplined trading practices and a focus on long-term trends.

Entry Rules

  • Breakout Method: Turtles used a simple breakout strategy to enter trades. For buying, they would enter long positions when the price exceeded a specific high over a defined period (e.g., 20 days). For selling short, they would enter when the price fell below a specific low over the same period.

Risk Management

  • Position Sizing: To control risk, Turtles adhered to strict position sizing rules. They calculated the number of contracts or lots based on the size of their account and the volatility of the instrument being traded.
  • Stop Losses: Protective stop losses were set at predetermined levels to minimize losses if the trade moved against them.

Exit Strategies

  • Profit Targets: For exits, Turtles used trailing stops that would lock in profits if the market continued to move in their favor. They also had fixed profit targets that varied depending on the strength of the trend.

Why It Works

The success of the Turtle Trading System can be attributed to its adherence to systematic trading rules and disciplined approach to managing risk. By focusing on capturing large moves in the market rather than trying to predict every twist and turn, Turtles were able to achieve consistent results over time.

Modern Applications

While the original Turtle Trading System was developed decades ago, its core concepts remain relevant today. Many traders continue to apply these principles in contemporary markets, adapting them to current trading technologies and market dynamics.

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The Turtle Trading System exemplifies the power of systematic trading and disciplined risk management. Its enduring legacy is a testament to the fact that, in trading, consistency and adherence to a well-defined strategy can lead to long-term success. Whether you’re a novice trader looking to establish a solid foundation or an experienced trader seeking to refine your approach, the principles of the Turtle Trading System offer valuable insights into achieving sustainable profitability in the markets.