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    The Original Turtle Trading Program

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    kaushal l patel
    The document describes the original turtle trading program started by Richard Dennis in 1984. He selected and trained 13 people, funding each with $500,000 to $2 million, and over the next four years they averaged 80% annual returns by following a set of simple trend following rules. The rules included trading liquid futures markets, using position sizing based on recent volatility, entering long or short based on 20-day or 55-day breakouts of highs and lows, using protective stops at 2% of account size, and exiting positions based on 10-day or 20-day breaks of highs and lows. While most trades lost money, the trends enabled large winning trades that more than made up for it, following

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    The Original Turtle Trading Program

    Uploaded by

    kaushal l patel
    993 views17 pages
    The document describes the original turtle trading program started by Richard Dennis in 1984. He selected and trained 13 people, funding each with $500,000 to $2 million, and over the next four years they averaged 80% annual returns by following a set of simple trend following rules. The rules included trading liquid futures markets, using position sizing based on recent volatility, entering long or short based on 20-day or 55-day breakouts of highs and lows, using protective stops at 2% of account size, and exiting positions based on 10-day or 20-day breaks of highs and lows. While most trades lost money, the trends enabled large winning trades that more than made up for it, following

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    The document describes the original turtle trading program started by Richard Dennis in 1984. He selected and trained 13 people, funding each with $500,000 to $2 million, and over the next four years they averaged 80% annual returns by following a set of simple trend following rules. The rules included trading liquid futures markets, using position sizing based on recent volatility, entering long or short based on 20-day or 55-day breakouts of highs and lows, using protective stops at 2% of account size, and exiting positions based on 10-day or 20-day breaks of highs and lows. While most trades lost money, the trends enabled large winning trades that more than made up for it, following

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    993 views17 pages

    The Original Turtle Trading Program

    Uploaded by

    kaushal l patel
    The document describes the original turtle trading program started by Richard Dennis in 1984. He selected and trained 13 people, funding each with $500,000 to $2 million, and over the next four years they averaged 80% annual returns by following a set of simple trend following rules. The rules included trading liquid futures markets, using position sizing based on recent volatility, entering long or short based on 20-day or 55-day breakouts of highs and lows, using protective stops at 2% of account size, and exiting positions based on 10-day or 20-day breaks of highs and lows. While most trades lost money, the trends enabled large winning trades that more than made up for it, following

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 17

    The Original Turtle Trading Program

    Atlantic Pacific Trading Group

    There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

    Richard J. Dennis of C&D Commodities is accepting applications for the position of Commodity Futures Trader to expand his established group of traders. Mr. Dennis and his associates will train a small group of applicants in his proprietary concepts. Successful candidates will then trade solely for Mr. Dennis: they will not be allowed to trade futures for themselves or others. Traders will be paid a percentage of their trading profits, and will be allowed a small draw. Prior experience in trading will be considered, but is not necessary. Applicants should send a brief resume with one sentence giving their reason for applying to: C&D Commodities 141 W Jackson, Suite 2313 Chicago IL 60604 Attn: Dale Dellutri Applications must be received by October 1, 1984. No telephone calls will be accepted.

    Background
    y An initial group of 13 people were selected and trained y Dennis funded each trader with $500,000 to $2,000,000

    accounts y Result: Over the next four years, the Turtles averaged an 80% annual return y What were the Turtles taught?

    What the Turtles Knew


    y 10 year non disclosure agreement expired 1993 y One Turtle began selling the rules in the mid 90s y Other Turtles thought selling the rules dishonorable y So they published the rules online for free y Richard Dennis was fine with that, believing that few traders

    would have the discipline to follow the rules anyway and the markets would change

    Time out
    y What were the rules? 1. Channel breakout 2. Trend

    following 3. Trailing stops


    y Why did they work? 1. Objective 2. Limited losses/let

    profits run 3. No prediction


    y When do they not work?

    Flat markets

    General Features of the Turtle System


    y Comprehensive set of rules 5 major decisions y Disciplined rules eliminate emotional or subjective

    decisions
    y Does not predict price
    y Instead, reacts to the market direction trend

    following system y Adds positions to winners, gets out of losers y Objective: limits losses, lets profits run

    Decision 1: Markets traded


    y Liquidity is the main criterion no aluminum, no broiler y y y

    chickens Traders were given a menu of liquid contracts from which to choose Some discretion: instructed to diversify Did not trade grains due to Dennis personal position limits or meats due to the perception that they were less than honest pits at that time Traded interest rates, stock indices, softs, currencies metals and energies

    Decision 2: Position Sizing


    y Number of positions are limited to manage potential

    exposure y Risk units are based on recent volatility Average True Range y Recent volatility is translated into equal dollar units based on contract size: N y N unit represents the same risk across commodities: 1%

    Position Sizing /Correlated Markets


    Level Type 1 Single Market 2 Loosely Correlated Market 3 Single Direction - Long or Short
    Single Market / Single direction Closely Correlated Markets - heating oil and crude oil; gold and silver Loosely Correlated Markets - gold and copper; silver and copper

    Maximum Units 4 Units 10 Units 12 Units

    Position Sizing /Adjustment to Drawdown


    y Size Adjustment 10% drawdown results in 20% reduction

    in notional account size Example


    Trading $1,000,000 notional, account draws down (10%, $100,000) leaving $900,000 New notional account size: $800,000 until balance returns to yearly starting equity

    Decision 3: Entries
    Based on Donchian channel breakouts 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)

    Decision 4: Stops
    N = 1% of account equity , maximum stop: 2N, 2% of account equity Crude Oil example N = 1.20 55 days breakout/buy entry point = 28.30 Initial stop = 2N or 2.40 points Entry Price 28.30 Initial Stop 25.90

    First Unit

    Stops / Additional positions


    N = 1.20 55 days breakout = 28.30 New position Entry Price First Unit 28.30 Second Unit 28.90 Third Unit 29.50 Fourth Unit 30.10 Stop 27.10 27.70 28.30 28.90

    Decision 5: Exits
    System 1 exit = 10 days low/high for long positions 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

    What to Expect
    y 65 75% losing trades y Extended periods of inactivity y Negative start and periods of negative returns y Small losses, larger wins y Losses managed with trailing stops - never loosened y Winners permitted to run y Always some giveback on exit

    CONTACT

    Atlantic Pacific Trading Group www.aptg.us NFA ID 0419905 702 463 0784

    JASON AUGUSTINE [email protected]

    NFA ID 0296058

    TIM ZURICK [email protected]

    NFA ID 0234606

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