Is trading for everybody? Can anyone learn how to do it? Richard Dennis and William Eckhardt made an experiment known as the Turtle. Let's see what was it about and what was the result.
Richard Dennis gained popularity in the early 1980s. He turned $5,000 into over $100 million. His success was truly impressive and he used to discuss it with his partner, William Eckhardt. Dennis was sure that anyone can repeat his success. Eckhardt, on the other hand, was convinced Dennis possessed a special talent.
Dennis has decided to perform an experiment. During his visit to Singapore, he had seen turtle farms. A comparison came to his head that he can grow traders as fast and efficiently as turtles on those farms.
Dennis has published an advertisement in The Wall Street Journal that he was looking for people to attend his training course. It was designed to last two weeks but could be repeated, and after this time the trainees (called by Dennis the Turtles) had to begin trading with real money. He was even giving his own money, so confident was he of success.
By this time, Dennis and Eckhardt were recognised masters in the trading world so thousands wanted to participate. But there was a place just for 14 people. The selection process was invented by Dennis and included, among others, a series of statements with True/False answers.
- A trader has a chance to make big money when he opens a long position at a low after a long downtrend.
- At the time of initiation, one should know exactly where to liquidate in the event of a loss.
- Having $10,000 to risk, one should risk $2,500 on each transaction.
- It is good to follow the opinion of others.
- Watching every quote in the market one trades is not helpful.
The above are examples of the questions from Dennis's survey. How would you answer? According to Dennis, the first and the fourth are false, and the rest are true.
The Turtle method
The first rule is that “the trend is your friend”. Go long when the breakout from the range occurs to the upside.
Specific parameters of Dennis's method were maintained in secret. We get, however, some insights into them in Michael Covel's book The Complete Turtle Trader: The Legend, the Lessons, the Results. Find a few examples below.
Your decision should be rather made based on true prices and not on the information you receive from commentators in the newspaper or on television.
A trader should be flexible. Do not be afraid to try distinct parameters for various markets in different circumstances. Only then you will be able to discover the best set for yourself.
Not only entry points should be carefully planned. The exit moment does matter. You should decide ahead where you will cut losses and where to take profit.
Calculate volatility with the average true range. This will allow you to vary the size of the position. Your exposure may be larger in the markets with lower volatility, and smaller in more volatile markets.
One should never risk more than 2% of the overall capital on a single trade.
Big returns cannot be reached if you are not comfortable with extensive drawdowns.
The results of the experiment were quite promising. Russel Sands, a former turtle, states that the Turtle method functions well. People who were personally trained by Dennis have made over $175 million in just 5 years.
There is, however, a downside to this method. Breakouts often offer false signals and so the trades lose. You should be always prepared for the worst scenario.
Turtle Trading is an impressive story of two legendary commodity traders. It proves that consistency is important in trading. Can you apply turtle rules in your trading even without Dennis's training? Of course, you can. The market goes up and down. You should enter a position on the breakout and exit when the price of the underlying asset reverses or consolidates.
Remember about false breakouts. It is said that with this method you should expect 40 to 50% accuracy. Go to the IQ Option demo account, test the Turtle strategy and decide whether it is something for you.
Wish you success!
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