Turtle Trading

The trading methodology that Richard Dennis taught his Turtles was arguably one of the most difficult trading methods for a typical trader to execute. Not only did it require the trader to hold on to winning positions for extraordinary lengths of time and profit, but also it required continually adding to that position if the market moved in the direction of the trade. Since adding to positions raises the average price, the Turtles often gave back substantial profits on retracements and often were stopped out of a trade that rode a significant trend with no profit to show for it. While all trend traders play for the outlier, Turtles played for the outlier of the outliers—typically just one trend a year. The entry was a simple 40 day channel breakout. For whatever reason, it doesn't work anymore, probably because so many tried to emulate Richard Dennis.

Dennis had a personal fortune of $200 million. At the time he was interviewed for "Market Wizards" he was in a serious losing streak. He closed down his fund that year after losing half of it. He also lost half of his net worth. He then quit trading and did other things. Eventually he came back to trading and attempted to use his old system. Supposedly he lost 8 figures in the process of learning that the old system no longer worked. However, Richard Dennis is a trader of a certain caliber and he was able to come up with another profitable system and he's making money again.

The interesting thing about the turtles was the discipline that was required to trade Dennis' system was tremendous. They had virtually no trading experience and most of them did alright at it, while a few did tremendously well and they are now trading their own funds. There is a story of one trader that broke the rules and made a bundle on a trade. Dennis promptly fired him for breaking the rules. The worst trade a trader can make is one that breaks the rules of your system and you win on it. This sets you off on a slippery slope that is incredibly hard to get off of before you ruin your account.

Dennis' amazing success as a trader and with the Turtles is powerful proof that discipline, money management, and risk control are what makes money in trading, not the systems