He does not take conventional wisdom for granted or accept anything at face value. “He knew that traders had a tendency to self-destruct. The battle with self was where he focused his energies.” During the interviews with the potential turtles, one of the abilities he was looking for was “to suspend your belief in reality”. Those who followed the rules and remained in the experiment made large profits by basing their trades on the Turtle Trader rules. Some even went on to have successful careers as commodity traders. One of the turtles, Curtis Faith, went on to start his own money management firm.

They cannot afford not to enter after a second breakout has occurred even though they lost money on the first breakout. It is taught that entry to the market should be random and only manage the trades thereafter. Hence exiting a trade becomes more important than entering a trade. They just have to limit their portfolio risk so that they can “live to fight another day”, and they will win with that little edge they have in the long run. It would seem, if I correctly understand the gist of this “experiment” in trading behavior, that Dennis wins the argument hands down and that “Nurture” takes the prize.

Should You Use Investing Apps Like Robinhood?

The so-called “TurtleTraders” were recruited from a classified ad which offered to train a small group of applicants as commodity futures traders and no experience was necessary. Indeed, it would seem to me to be required that any previous sort of trading experience be prohibited lest the variables in this “experiment” be tainted. But, of course, strictly speaking, this was not a scientific experiment at all and so the options could be, and in fact were, less restricted and constrained. All they had to do was follow the Turtle trading system.

One turtle trader visited Singapore at one point in time and saw a turtle farm. When returned, the name “turtle traders” was suggested to the group as a metaphor. Richard Dennis was raising a trader out of each one of the The Complete TurtleTrader traders, as the farmer was raising turtles on the farm. Such method will allow the trader to take a larger position when the market volatility is low. The maximum they will add to their winning position is 5 units.

Turtletraders: The Premise

So that’s what you can expect at stockideas.org – and in my free eBook above. Of course, if you want more information about The Complete Turtle Trader, you can also check out the video book review below. The Complete Turtle Trader is a wonderful book about how trend following can be applied. I seriously recommend that if you have any interest in technical trading you check outThe Complete TurtleTrader on Amazon. As was the case with my Trend Following book review, I am struggling to find something negative to say about The Complete Turtle Trader. It seems like traders and investors are always looking for the best way to find stock trading ideas.

Between 1987 and 1988, at the same time Dennis’ turtles were finishing their five-year experiment, Dennis lost more than fifty percent of the assets he managed. Whether Dennis was strictly following his Turtle Trading system when he lost all this money is up for debate. When Dennis, Eckhardt, and the turtles used the term volatility, they meant a certain kind of volatility, specifically how much a market goes up and down daily. For example, let’s say one share of IBM traded at $125 on average, but from day to day, the price fluctuated between $123 and $127. They would use the term “M” to describe daily market volatility.

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And I wouldn’t be complaining if it were a little bit longer. But if that’s the biggest problem with this book then I think I can give it two thumbs up. In chapter The Complete TurtleTrader 5 of The Complete Turtle Trader, Michael Covel actually reveals the exact trading systems that the turtles used to build their multi-million dollar fortunes.

Add the Average True Range indicator to your chart and check the daily ATR range. That’s the daily volatility amount of this instrument. If the price makes a 1N in your favor, you add to your position. If the price makes a 2N move against you, you close your position.

By Michael W Covel

One of the hardest parts of trading is deciding when to enter and exit the market. These additional rules related to position sizing and the use of stops. The turtle trader experiment is often compared to picking a random person off the street, providing them with two weeks of training, and then sending them off to become millionaires. This is not to say Dennis did not teach them a lot, only that when we discuss the results of the experiment, it’s useful to keep in mind that these were not people plucked randomly from off the street. The two regularly discussed this topic, and finally, they decided to experiment to see who was right. Dennis would find a group of people, spend two weeks training them on how to follow his trading rules, and then let them start trading.

With more than 40 years of collective experience in book sales, publishing, and bulk book purchasing, we know the needs of event planners, authors, speakers and, of course, readers. Should you look at the price analysis above all else? Tim and Stephen agree that you don’t have to be super smart to be a good trader. It’s about being street smart and being able to identify patterns. They discuss how this is largely a matter of becoming very consistent, which is the overall goal of this podcast.

Trading Strategy

It is important to keep it simple if not the system will not work. Contrary to “buy low sell high”, turtles buy high and sell higher or sell low and buy lower. The monthly expectation of the turtles beats the monthly expectation from buy and hold market indexes. Eckhardt emphasized that they are not mean shooting star chart pattern reversion traders who believe the market will always return to the mean or fluctuate around the mean. Dennis and co. believe the market trends and often come unexpected, which also means the payout will be very rewarding. Goodreads is the world’s largest site for readers with over 50 million reviews.

Some turtles were asked to leave the experiment after they struggled to abide by the rules Dennis had taught his turtles. In general, most popular trading systems with specific rules and guidelines eventually stop working as more traders using similar strategies arbitrage away the profits. There are other potential reasons why the Turtle Trading strategy may no longer work. But Jerry Parker, a well-known turtle who still uses the system today, says that it’s timeless.

Trade Your Way To Financial Freedom

They need to be aware of the price level at which every asset they follow, the volatility levels, their equity that can be at risk, and the direction of the market. The turtles were taught to be trend followers where they used a system of rules to tell them the bet size, entry and exit points. Rules “worked best” as they eliminate human judgements which do not work well in the market. That being said, even if rules are followed religiously, traders are not expected to be right all the time and it is crucial that they cut their losses and move on when they are wrong. It is important to make every trade a good trade rather than a profitable trade. As long as good trades are made, profits will come in the long run.

Stephen offers his secret for finding consistency by letting go of arrogance (it’s a big moment!). In last week’s episode, Tim and Stephen began to explore 8 different points from the book. See last week’s episodes for points 1-4; read on for the remaining ones. If the data matches the hypothesis, you accept the theory and report the findings. If the evidence does not match the hypothesis, you refine the thesis and begin the process over. “If this were in fact the dollar bet , which is the theory, can trading be taught…but maybe not to just anyone,” DiMaria said.

So, they would say M equals four, for this example of IBM. Dennis taught his turtles to rely on the scientific method to minimize the psychological impacts of trading that could cause traders to make mistakes and lose significant amounts of money. In this respect, Dennis was ahead of his time. This was 1983, and Dennis put into practice some of the basic concepts of “prospect theory, “ which Daniel Kahneman would go on to win a Nobel Memorial Prize in Economic Sciences in 2002.

• The turtles were taught to be trend followers where they used a system of rules to tell them the bet size, entry and exit points.
• During this time, Dennis’s name joined those of other titans in the industry such as George Soros and Michael Milken.
• Money management, or as it is also known risk management or bet and position sizing, needs to be the first topic a trader will master.
• When they found a trend, they would follow it to profit from capturing most of the trend, whether that be up or down.
• That trader was Richard Dennis, an unlikely champion of the trading floor.

Unlike value investors, they do not judge price as too high or too low. In The Complete TurtleTrader, Michael W. Covel tells their riveting story with the first ever on-the-record interviews with individual Turtles. He shows how Dennis’s rules worked–and can still work today–for any investor with the desire and commitment to learn from one of the greatest investing stories of all time. What happens when ordinary people are taught a system to make extraordinary money? Convinced that great trading was a skill that could be taught to anyone.

Tim and Stephen discuss how this is an invaluable approach to the market. After all, if you bet too big, it’s a probabilities game. As Stephen wisely adds, “you could be done for”. Tim and Stephen discuss different approaches to mitigating risk by perfecting certain setups, testing various methods, and really working toward finding what works consistently for you as a trader. The turtles which made it through the experiment were those who followed the rules. Not all the turtles managed to make it, though.

Reviewed by: John Egan