One popular trading style that keeps on coming back from
dead with regularity of baddie in a horror flick is 'Turtle Trading'. A swing trading style, Turtle Trading system was devised by legendary trader Richard Dennis in order to show that great traders weren't born, they could be 'grown', just like turtles in a Far East Turtle farm.There are many websites offering courses in how to turtle trade, sometimes for thousands of dollars, some of them even run by people who are allegedly 'ex-turtles'. This is frankly hilarious - entire turtle system is available for free as a PDF download from www.originalTurtles.org and we here at www.traders101.com STRONGLY advise you to grab it and read it before you lash out any cash on a 'course'. As far as we know, there is NOTHING to be learned from these expensive 'courses' that you can't find for free in excellent download, written by real Turtle traders who were trained by great man himself.
In order to help you decide whether turtle trading is for you, here's a quick overview. First off, in 1983 when Dennis tried scheme, it worked. It worked BIG TIME in fact, producing an AVERAGE 80% compounded over four years of trial. The turtle trading rules themselves were simple - secret was ability to STICK TO THE RULES!. This made it a mechanical trading system par excellence, and a good mechanical trading system, as you should know, is key to consistency.
The turtle trading rules specified in detail what markets to trade, how to size a position properly, when to enter and exit, how to use stops to exit a losing position, how to exit a winning position, and some ancillary tactics on buying and selling of large positions without alerting market.
What to trade. The turtles traded futures (commodities, as they were known at time). They traded all liquid futures markets except grains and meats. That included T Bonds, coffee, sugar, cotton, currencies, precious metals and oils. An individual trader could decide what he wanted to trade.
Position Sizing. The turtles liked to normalize their positions based on underlying dollar volatility of market - a common trick nowadays, but advanced for 80s. This made effective risk across markets similar, and allowed them to trade many markets in a similar way. Key to this is 'N' - underlying volatility of a market. To calculate N, find 20 day exponential MA of ATR (true range). There's a lot on Moving Averages over at www.traders101.com if you need a refresher. Having found N, 'Dollar Volatility' is N x Dollars Per point. The S&P, for example, moves 50 bucks a point on emini contract.
To create a turtle trading 'unit', you work out 1% of your equity, and divide by dollar volatility. As you might have guessed, its a low risk strategy, as you need to be able to withstand extended drawdown periods to 'stay in game'. The 'unit' tells you how many contracts to trade, and still stay relatively safe. To further de-risk system, each market had limits. No more than 4 units could be traded in a single market, for example.
