(Part of our ongoing series of questions from readers)
Many of the questions I receive relate to my days as a Turtle and to the system that we traded at that time. I’m sure that those who ask about the Turtle system only want to follow in the footsteps of the Turtles, to find success in their own trading much as we copied the success of Richard Dennis 25 years ago. The hard truth is that you can’t take the approach we did and expect to repeat our success, even if you have the necessary capital and intestinal fortitude. So I am hesitant to answer these questions without a few specific warnings.
First, I don’t recommend that anyone trade the Turtle System. It has been over 25 years since we first received the rules to the trading system which has since become famous as the Turtle system; 25 years is a long time. The markets are not the same as they once were. The Turtle system does not perform as well as it once did.
Second, as I covered in Way of the Turtle, there are much simpler systems that have better results than the old turtle system.
Third, most traders really don’t have the personality to trade the old Turtle System. It is not easy taking large losses when the market moves against you as is necessary when one trades any long-term trend-following system. Unless you can stomach large drawdowns, you should not trade a long-term trend-following method. Unless you have experienced some large drawdowns, you won’t know if you can handle those drawdowns. Most people overestimate their tolerance for the pain of watching profits and capital erode.
Finally, trading a diversified portfolio of futures requires a lot of capital, as much as $200,000 to $250,000 if you want to keep overall risks reasonable. The reason for this requirement is that many of the futures contracts are too large for a smaller account size. The daily fluctuations using a single contract represents too much leverage for a smaller account.
That’s the bad news for those who wanted to follow the success of the Turtles.
The good news is that today’s markets have their own opportunities. New liquid markets are much more viable for traders with smaller accounts. The sophistication of today’s tools beats anything even the best-funded institutions had available 25 years ago. And simple methods still work.
Trading From Your Gut
Way of the Turtle
Inside the Mind of the Turtles
{ 4 comments… read them below or add one }
Just curious
1. if the turtle don’t effective anymore is William Eckhart and Jerry Parker still use turtle trading system ?
2. Is turtle system need quite amount money that mean richard dennis don’t use turtle system when he start trading with 5000 $ ?
Regards,
In looking at the way their respective returns have diverged it is pretty clear that William Eckhardt is using some thing radically different and that Jerry Parker is using a mix of long-term trend-following approaches. I doubt either one of them is using the Turtle System as we traded it for any of their funds.
Richard Dennis only developed the Turtle System shortly before the Turtle program began. They had several other systems they considered teaching us at the time.
Rich made most of his early money scalping in the pits and then he later started position trading. He was a fairly discretionary trader even at the time of the Turtle program. He definitely did not make his early money using the Turtle System or anything like it.
What a refreshing change to see an honest discussion of this old system and of trend following in general. It is a damn difficult route – the long deep drawdowns, while certainly no worse than those you can expect to suffer in the stockmarket, make LTTF a tough path to follow.
Congratulations on your new website!
Curtis:
I loved Way of the Turtle! You make some good points about the simplicity of systems and also about filters in helping smooth systems out. It is obvious if you look at Turtles and 2nd gen Turtles that are still trading, that their numbers, while still good, are not a big as in the 70s and 80s (ie. annualized trend of returns is going down). What systems and filters are you drawn toward now that seem to highlight the inefficiencies in markets today? Also, being that things that are out of favor tend to start doing well, are you expecting a return of Turtle style trend trading in the future sometime?