The Turtle Trading Method: Simplified
1. The Big Idea
The Turtles were taught to follow trends. They believed that prices move in trends, and their
goal was to catch big moves by entering early and riding the trend until it reversed.
2. Tools You Need
●​ Exponential Moving Averages (EMAs):
○​ 20-period EMA (short-term trend).
○​ 55-period EMA (long-term trend).
●​ Breakout Levels:
○​ 20-day high/low (for short-term entries).
○​ 55-day high/low (for long-term entries).
3. Step-by-Step Rules
Step 1: Determine the Trend
●​ Use the 55-period EMA to decide the overall trend direction:
○​ If the price is above the 55-period EMA, the trend is UP (only look for long
trades).
○​ If the price is below the 55-period EMA, the trend is DOWN (only look for short
trades).
Step 2: Wait for a Breakout
●​ Use breakouts to enter trades:
○​ For long trades: Wait for the price to break above the 20-day high.
○​ For short trades: Wait for the price to break below the 20-day low.
●​ Alternatively, you can use the 55-day high/low for more conservative entries (fewer
trades but higher reliability).
Step 3: Enter the Trade
●​ Once the breakout occurs, enter the trade in the direction of the trend:
○​ For a long trade: Buy when the price breaks above the 20-day high.
○​ For a short trade: Sell when the price breaks below the 20-day low.
Step 4: Set Your Stop Loss
●​ Place a stop loss to limit your risk:
○​ For a long trade: Set the stop loss below the recent swing low.
○​ For a short trade: Set the stop loss above the recent swing high.
Step 5: Manage Your Position
●​ Use the 20-period EMA to manage your trade:
○​ For a long trade: Exit when the price closes below the 20-period EMA.
○​ For a short trade: Exit when the price closes above the 20-period EMA.
●​ Alternatively, you can use a trailing stop to lock in profits as the trend continues.
Step 6: Risk Management
●​ The Turtles risked 1-2% of their account on each trade.
●​ They used position sizing based on market volatility (e.g., using the Average True
Range or ATR to determine how much to risk).
4. Example Trade
Let’s say you’re trading the EUR/USD on the daily chart:
1.​ Step 1: The price is above the 55-day EMA, so the trend is UP.
2.​ Step 2: The price breaks above the 20-day high, signaling a long entry.
3.​ Step 3: You buy EUR/USD at the breakout price.
4.​ Step 4: You place a stop loss below the recent swing low.
5.​ Step 5: You hold the trade until the price closes below the 20-day EMA.
6.​ Step 6: You risk no more than 1-2% of your account on the trade.
5. Key Principles
●​
●​
●​
●​
●​
Follow the Trend: Only trade in the direction of the 55-period EMA.
Be Patient: Wait for breakouts to confirm entries.
Cut Losses Quickly: Use stop losses to protect your capital.
Let Winners Run: Stay in the trade as long as the trend continues.
Manage Risk: Never risk more than 1-2% of your account on a single trade.
Summary of the Turtle Trading Method
1.​ Trend Filter: Use the 55-period EMA to determine the trend direction.
2.​ Entry Signal: Enter on a breakout above the 20-day high (for long trades) or below the
20-day low (for short trades).
3.​ Stop Loss: Place your stop loss below the recent swing low (for long trades) or above
the recent swing high (for short trades).
4.​ Exit Signal: Exit when the price closes below the 20-period EMA (for long trades) or
above the 20-period EMA (for short trades).
5.​ Risk Management: Risk no more than 1-2% of your account per trade.
Use a Position Size Calculator
To make this easier, you can use a position size calculator, which is available on most
trading platforms or as a standalone tool online. Simply input:
●​
●​
●​
●​
Your account size (Example €40,000).
Your risk percentage (Example 0.5%).
Your stop loss distance (in pips).
The currency pair you’re trading.
The calculator will automatically determine your position size.