The Original Turtle Trading Rules
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
Background
Over next four years, they earned an average annual compound
rate of return of 80%
1. A Complete Trading System
System provides answer for trading
System follows a set of rules
No human emotion involves in trading
Buy
Buy
Sell
2. Know what to buy and sell
The 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
&PackagingClean 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 & Entertainment
Transportation
Building & Construction
Distr. Unit Trusts &
Funds
Metals & Mining
Utilities Business & Support Services
Electronics & Engineering
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 Adjustment
Dollar Volatility = N * Dollars per Point
Unit Size = 1% of Account / Market Dollar
Volatility
3. Position Sizing
3. Position Sizing
http://www.turtletrades.com/calculateN.php?thesymbol=MSFT
3. Position Sizing
Level
1
2
3
4
Type
Maximum Unit
Single Market
4
Units
Closely Correlated Market
6
Units
Loosely Correlated Market
10 Units
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
3. Position Sizing
Adjusting 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
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)
4. Entries
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
5. Stops
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
28.90
Fourth Unit 30.10
29.50
5. Stops
6. Exits
The 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”
7. Tactics
limit orders is better than market orders-offer a chance for better
fills and less slippage
bid price > ask price = trading
Fast Market
A market can move thousands of dollars per contract in a few
minutes - do not panic and wait for the market to trade
Simultaneous Entry Signals
If a market occurs the stretch of a few hours , take the trade as
they came.
Buy Strength and Sell Weakness
use Visual examination
Today
Testing
Testing
Testing
Testing
Testing
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