Skip to main content

Richard Dennis is a renowned name in the trading world, famously known for creating The Turtle Experiment and The Turtle Trading System. His significant influence extends globally among traders.

In 1983, Dennis and his friend Bill Eckhardt debated whether trading skills were innate or could be taught. Dennis believed in teaching trading skills, while Eckhardt leaned towards genetic predisposition. To resolve this, they trained aspiring traders, known as ‘Turtles’, providing them with real accounts to test their theories. The Turtle Experiment and the system they learned, The Turtle Trading System, emerged from this venture.

The Mechanics of the Turtle Trading System

The Turtle Trading System was an all-encompassing mechanical system, covering every trading aspect from entry to exit strategies, and even market selection. Rooted in trend-following principles, it primarily utilizes Donchian Channel Breakouts.

The system had two rule sets, one for 20-day periods and another for 55-day periods. Trades were initiated following breakouts from these periods, with stringent risk management where no trade risked more than 2%. Exits for profitable trades also adhered to specific breakout criteria. The system’s details were precise, leaving little room for subjective trader decisions.

Further Reading: Elevate Your Trades: The Power of Technical Analysis

Relevance of the Turtle Trading System Today

The Turtle Trading System still holds relevance, as evidenced by both manual observation and backtesting. While it may not yield the high profits of the past and might generate more false signals, it remains a viable strategy. However, its effectiveness doesn’t guarantee universal success in the markets.

Success in trading hinges on more than just following rules. Key factors like discipline, consistency, patience, and confidence are crucial. Adhering strictly to the rules is vital; without this discipline, failure is inevitable. The Turtles who excelled were those who possessed these qualities and followed the system meticulously.

Our recent tests on a modified Turtle Trading system have shown promising results in various stocks and indices. For comprehensive details, AFL code, and a backtesting report, visit the link below:

Donchian Channel Strategy: Unlocking Trading Success

Final Thoughts on Turtle Trading

The essence of turtle trading lies in its trend-following nature, exemplifying a classic trend following system. While many traders continue to profit from it, others, including some original Turtles, did not find success. This highlights that successful trading transcends mere rules; it’s about emotional control and adherence to a disciplined strategy. Richard Dennis himself stated that the challenge isn’t creating the rules but having the confidence to stick to them during tough times.