A Turtle Tale… A Turtle Tale… I once knew a sea turtle… And her story’s quite a TALE!
The Original Turtle Trading Rules
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Transcript of The Original Turtle Trading Rules
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The Original Turtle Trading Rules
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Background Richard Dennis, set up a group of 13
people and tranned them about trading stock market (year 1989).
Two months later after done with tranning, Dennis funded each of people with $500,000 to $2,000,000
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Background
Over next four years, they earned an average annual compound rate of return of 80%
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1. A Complete Trading SystemSystem provides answer for trading
System follows a set of rulesNo human emotion involves in trading
Buy
Sell
Buy
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2. Know what to buy and sellThe Turtles traded all liquid U.S markets
except the grains (small contracts)and the meats(a corruption problem).
Industries Aerospace & Defense Chemicals Exchange Traded Funds Oil, Gas &
Energy Agriculture, Paper &Packaging Clean Tech Food Manufacturing & Products Publishing& Media Automotive Closed End Funds & Investment Companies Healthcare & Pharmaceutical Real Estate Banks, Financial Services & Insurance Computers, Technology & Internet Industrial & Manufacturing Telecommunications Biotechnology Consumer & Retail Products Leisure & EntertainmentTransportation Building & Construction Distr. Unit Trusts & FundsMetals & Mining Utilities Business & Support Services Electronics & Engineering
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3. Position Sizing True Range = Maximum(H-L,H-
PDC,PDC-L) where H - Current High
L - Current Low PDC - Previous Day's Close
N = (19 X PDN + TR)/20 where PDN - Previous Day's N TR - Current Day's True Range
Dollar Volatility AdjustmentDollar Volatility = N * Dollars per Point
Unit Size = 1% of Account / Market Dollar Volatility
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3. Position Sizing
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3. Position Sizinghttp://www.turtletrades.com/calculate-N.php?thesymbol=MSFT
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3. Position SizingLevel Type Maximum Unit1 Single Market 4
Units2 Closely Correlated Market 6 Units3 Loosely Correlated Market 10 Units4 Single Direction - Long or Short 12 Units
Single Market
Closely Correlated Market -- heating oil and crude oil; gold and silver
Loosely Correlated Market -- gold and copper ; silver and copper
Single Direction
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3. Position SizingAdjusting Trading Size The Turtle were
instructed to decreased the size of account by 20% if we went down 10%
Trading $1,000,000 -> account went down
(10%) $100,000 = left $900,000 Next Trading we have $800,000 -> account
went down (10%) $80,000 = left 720,000 Next Trading we have $640,000
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4. Entries System 1 - A short term system based on a 20-day
breakout. System 2 - A simpler long-term system based on a 55-
days breakout.System 1 Entry Price > average 20-day high = buy one unit (long
position) Price < average 20-day low = sell one unit (short
position)System 2 Entry Price > average 55-day high = buy one unit (long
position) Price < average 55-day low = sell one unit (short
position)
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4. Entries
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5. Stops"There are old traders; and there are bold traders; but
there are no old bold traders" Traders that don't use stops go broke.
Since N = 1% of Account Equity , So the maximum stop would be 2% (2N)
For Example Crude Oil
N = 1.20 55 days breakout = 28.30
Entry Price Stop
First Unit 28.30 27.70
Second Unit 28.90 27.70
Third Unit 29.50 27.70
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5. StopsN = 1.20 55 days breakout = 28.30
Entry Price Stop
First Unit 28.30 27.70
Second Unit 28.90 27.70
Third Unit 29.50 28.90
Fourth Unit 30.10 29.50
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5. Stops
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6. ExitsThe system 1 exit = 10 days low/high for
long positions The system 2 exit = 20 days low/high for
long positions
“Waiting for a 10 or 20 days new low can often mean watching 20%, 40%
even 100% of significant profits evaporate”
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7. Tacticslimit orders is better than market orders-offer a
chance for better fills and less slippage bid price > ask price = tradingFast MarketA market can move thousands of dollars per
contract in a few minutes - do not panic and wait for the market to trade
Simultaneous Entry SignalsIf a market occurs the stretch of a few hours ,
take the trade as they came.Buy Strength and Sell Weaknessuse Visual examination
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Today
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Testing
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Testing
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Testing
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Testing
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Testing