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