The Complete TurtleTrader

1. Richard Dennis proved nurture trumps nature in trading success

"Trading was more teachable than I ever imagined. Even though I was the only one who thought it was teachable … it was teachable beyond my wildest imagination."

Nature vs. nurture debate. Richard Dennis, a successful Chicago trader, believed that trading skills could be taught to anyone, while his partner William Eckhardt thought trading success was innate. This disagreement led to the famous Turtle experiment in 1983.

Diverse group of novices. Dennis recruited a group of people with diverse backgrounds, including:

• College graduates from various fields
• A security guard
• A game designer
• An accountant
• A blackjack player

Empirical results. The experiment's success proved Dennis's point that trading skills can be learned, challenging the notion that successful traders are born with special talents or intuition.

2. The Turtle experiment: Teaching novices to become millionaire traders

"Given what the computer can do today—compared with what it could do only a few years ago, I just can't see how any human could possibly compete on a level field with a well-designed computerized set of systems."

Two-week intensive training. Dennis and Eckhardt taught their recruits a complete trading system in just two weeks, covering:

• Market analysis
• Entry and exit rules
• Position sizing
• Risk management

Real money, real stakes. After training, each Turtle was given $1 million of Dennis's money to trade, with a profit-sharing arrangement:

• Turtles kept 15% of profits
• Dennis retained 85%

Remarkable results. Many Turtles achieved extraordinary success, with some making 100% or more per year over four years, proving the effectiveness of the taught system.

3. Core Turtle trading philosophy: Trend following and risk management

"Pure price systems are close enough to the North Pole that any departure tends to bring you farther south."

Trend following strategy. The Turtles were taught to:

• Identify and follow market trends
• Enter positions when prices broke out of recent ranges
• Hold positions as long as the trend continued
• Exit when the trend reversed

Risk management focus. Key principles included:

• Limiting position sizes based on market volatility
• Using stop-loss orders to limit potential losses
• Diversifying across multiple markets
• Adjusting position sizes based on account equity

Objective decision-making. Turtles were trained to:

• Rely on price action rather than fundamental analysis or news
• Follow rules consistently, avoiding emotional decision-making
• Accept losses as part of the trading process

4. Turtle trading rules: Simple yet powerful systematic approach

"The single hardest thing I have to do to make people understand how I trade is to convince them how wrong I can be about things, how much of a guess it is."

Entry and exit rules. Turtles used two main systems:

• System 1: 20-day breakout for entry, 10-day breakout for exit
• System 2: 55-day breakout for entry, 20-day breakout for exit

Position sizing. The "N" concept was used to determine position sizes:

• N = 20-day Average True Range (ATR)
• Position size = 1% of account equity / (N x dollar value per point)

Risk management rules:

• 2% maximum risk per trade
• Pyramid winning positions
• Reduce position sizes during drawdowns

Diversification. Turtles traded a wide range of markets:

• Commodities
• Currencies
• Stock indices
• Bonds

5. Mental toughness and discipline: Key factors in long-term trading success

"To follow the good principles and not let fear, greed and hope interfere with your trading is tough. You're swimming upstream against human nature."

Emotional control. Successful Turtles learned to:

• Stick to their trading rules even during losing streaks
• Avoid second-guessing the system
• Accept that many trades would be losers

Patience and persistence. Key mental attributes included:

• Waiting for high-probability setups
• Holding winning trades for extended periods
• Continuing to trade through drawdowns

Overcoming cognitive biases. Turtles were taught to recognize and overcome:

• Confirmation bias
• Recency bias
• Loss aversion
• Overconfidence

6. Life after the Turtle program: Varying degrees of success and failure

"The most interesting thing about the Turtle program was observing who succeeded and who did not."

Divergent paths. After the program ended, Turtles experienced different levels of success:

• Some, like Jerry Parker and Paul Rabar, built highly successful trading firms
• Others struggled to replicate their success or left trading altogether

Factors influencing success:

• Entrepreneurial skills
• Ability to raise capital
• Adaptation to changing market conditions
• Continued discipline in following trading rules

Lessons learned. The varying outcomes demonstrated that:

• Trading skills alone are not sufficient for long-term success
• Business acumen and perseverance are crucial
• Adapting to client needs and market changes is essential

7. Salem Abraham: Second-generation Turtle success story

"It's like climbing a mountain. Which step was the most important? Every step is needed to get to the top of the mountain. Each individual step is not that much."

Self-taught success. Abraham learned Turtle-style trading through:

• A chance meeting with Jerry Parker
• Intensive self-study and research
• Developing and testing his own systems

Entrepreneurial drive. Key factors in Abraham's success:

• Starting with a small account and gradually growing
• Adapting Turtle concepts to his own style
• Diversifying into other business ventures

Long-term performance. Abraham's track record includes:

• Consistent profits over two decades
• Surviving and thriving through various market conditions
• Building a successful trading firm in a small Texas town

8. Entrepreneurial spirit: The X-factor in sustained trading success

"I think they [the winning Turtles] have a self-confidence or charisma to run a business. There's a drive to go out and do it. Then there is a drive to want to do it."

Beyond trading skills. Successful Turtles demonstrated:

• Business acumen
• Marketing and fundraising abilities
• Adaptability to changing market conditions

Key entrepreneurial traits:

• Risk-taking
• Perseverance
• Innovation
• Self-motivation
• Ability to learn from failures

Building sustainable businesses. Top Turtles like Jerry Parker:

• Adapted their trading approach to attract institutional investors
• Developed robust operational infrastructure
• Expanded into multiple markets and strategies

Last updated: October 12, 2024