Turtle Trading System

Watch out, Neil.
Their set-ups are reversed by modern turtle soup traders who fade the moves.
An example of what used to work and doesn't any more.
turtles/ longer term trading

I have read the now infamous story of the turtles many times before. I received an email shot from Vince Stanzione a week or so ago promoting a seminar that russel Sands (one of the original turtles) was holding in the UK, basically selling the turtle "system". (£2000 to attend!!- won't be bothering!).

I also recently used a link from this site to download the original turtle system rules for free- can't be sure is this was actually the original system obviously but when stripped down it is a very simple trend following system with some solid money management rules which can be applied to many markets.

I have also been re-reading the market wizards books which profile a number of turtles and also many other successful traders.

Which brings me on to my point:-

The turtles and many other of the traders profiled in the market wizards books had consistent returns on very large funds of up to 100% per year compound on original capital. Most of them were longer term trading strategies based on daily timescales with individual trades lasting several days, weeks or even months in some cases.

Now I know times have moved on even from the "new market wizards" book- written in the early 90's and daytrading has become much more accessible/ feasible since then, but:-

1) If returns of this level can be made using end of day data only, does day trading actually enhance the returns on a comparable time spent in front of the monitor basis.

2) Are there any fellow members out there trading longer term, ie looking to catch the larger trends over weeks/ months? If so, what kind of annual % of capital are you achieving? Similarly, any daytraders actually making significantly higher % per annum?

I am aware that "how much can I make" questions have been posed before. However, I am not so much interested in the methods used etc. I currently trade part time, but my eventual aim, if I can make a success of this and grow my account to a significant level, is to progress to full time trading ie daytrading.

What I am really getting at, is does daytrading generate significantly higher returns than longer term trading? If so, I have a valid goal. If not, then maybe I am aiming for the wrong thing and I should stick to part time trading and keep the day job as well?

Assuming I can make a success of this trading lark in the first place!

Any thoughts/ feedback/ discussion on this would be appreciated.
Most people ask how much return on capital can they expect. This obviously depends on the individual and their training and experience, but most people should be able to attain at least 15%-20% per month.
This may sound a lot, but is actually quite modest. For example have a look at one I've been trading today, EXPE.
Long at 64.65 at just closed at 66.25
That's a return of 2.4% today alone.
Think about 20 trading days per month, the maths is easy with a modest target of 15%-20%.
You can trade like this with size of one or two thousand shares, but with a few thousand shares you don't get the fills at the level you want so don't go thinking you can scale up every month till you're the richest person on the planet by year end. It doesn't work like that. A very good living and putting money aside is really not that difficult once you understand how.
You can't trade like that holding positions overnight unless you're in a very strongly trending market and even then you're taking on great and unnecessary risk. For example I wouldn't hold 1000 shares of EXPE overnight. Anything can happen. No, I'm happy being in a trade where I can control my risk almost precisely so if the market goes against me by 10c or 15c I know how to exit for a maximum loss of $100 or $150, usually less, in an instant.

As for Richard Dennis and the Turtles. It doesn't work in this sort of market environment and in any case you have clearly not heard of turtle soup set-ups which trade against break outs, not to mention hugely higher liquidity and volatility in the last few years with ECNs and people like me and thousands of others altering the parameters of this glorious and profitable business.
Hope that helps.
thanks for your reply Mr C. I am reassured that my goal is a feasible one!

Do you think that if a "Market Wizards of the new millenium" book was written, it would profile mainly day traders such as yourself? I can feel a best seller coming on already!!

Does anyone know of any books that profile successful day traders?

What would you say the optimal maximum capital base to work from is bearing in mind your comments on maximum no of shares to get quick fills etc?

Are these sort of returns being experienced by other intraday traders on here?

Also, is anyone successfully trading longer term. ie holding positions for several days/ weeks and what sort of annual returns are being made using these methods?

I'm one of the people that tried unsuccessfully to ask the same question as you are asking, so I suppose I should at least give some input into your attempt.

I frequently hold shares for a week, a month or longer, but I only trade indices so there is less chance the price will go to zero and a better chance they will one day return to the price I bought them at (I never sell at a loss). In the five months that I have been doing this I've turned £25k into 40k and if the FTSE was at the level I started at it would be about 48k. Of course if the FTSE was lower I would have much less, possibly even a loss and I would have to wait longer for the profits - my strategy is all about patience.

To try and save you a bit of time, I think the consensus of these discussions in the past is that day trading can pay and can pay very well - but there are not many that can do it very well. The road to success is long and hard and requires patience, dedication and a few other skills as well. There are no short cuts, paper trade and if this is succesful trade with pocket money and keep building up until you can give up the day job.

I think you might compare it with trying to become a pop star. There are plenty of pop stars that make lots of money and asked how they got there they say they did not take no for an answer. Of course we never see the ones that did not take no for an answer and still did not make it. So you have to think carefully about how much you want to throw at this goal and be prepared to quit before it bankrupts you. Oh and look out for all those agents and recording studios - there is an entire industry ready to help you part with your money.

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darrenf said:
Does anyone know of any books that profile successful day traders?

The best daytraders (ie the really really successful ones) are exceedingly good at keeping their heads down. Two reasons for this: a) they don't want to attract the attention of the IR (UK) or IRS (US) because their trading activity will be the most tax-efficient that money can buy, and b) they will have realised that any attention will also bring with it a security risk for them and their families from some of life's oddballs.

The ones you come across, in the main, are the mediocre ones who make money but are not in the league of making huge money.

Also you will hear about the failed ones, who cannot make money by trading, therefore run fee-paying websites, fee-paying alert services and chat rooms, write fee-paying articles, write books, and anything else they can think of to earn money, because they certainly can't get it from trading. They get the publicity because they need it to continually bring new naive fee-paying punters onboard.

Just my views from having come across a few of these people. :cheesy:

A very good post, scathing but accurate none the less.
Asking how much money you can make on the markets is a bit like asking how long is a piece of string. It depends on how well your strategy works and how much you are willing to bet on it! So it is something you have to work out yourself by plotting the historic returns in % terms with the caveat that this is just an estimate since markets characteristics can change. Then look at the drawdowns and increase or decrease the bet size so that these are within your margin and psychological acceptable levels. If you cannot plot the returns, even subjectively, then you may not have a strategy at all and you should reconsider trading before refining it. Remember also to allow for financing, inflation and to compare it with you risk free return.

My average returns are of the order of 50% a year with a 3% drawdown, these are defined as if I had bought or sold the actual shares, with individual holdings lasting about 3 weeks. However it could easily be 5% or 500% simply by varying the gearing or bet size. Be careful if you aim high though, if I was aiming for 500% I would have to tolerate 30% drawdown in this case, which could start to affect the returns but I would have probably died of heart attack well before then!
Hi Darrenf - an interesting post - I started a similar discussion about a month ago that generated some very helpful feedback.

My thinking is very much along the lines of casseopeia in that return with excessive risk is probably more due to chance that skill and therefore probably a passing pleasure. I ranted on at length about this in my last post called 'Is 10-15% really possible?'' on the ''general trading chat'' site.

My trading mind since then has been split clean down the middle. On one side I enjoy reading frugi's swing/position trading methods (take a look on Fillyaboots.com) and on the other I find the idea of ''turtle'' type trend trading very intuitively appealing. I have still not resolved this dilemma but that's not really the main subject of this post.

I wondered why Mr Charts felt that trend following techniques no longer worked. No, I'm not going to argue with a clearly far more experienced trader, but if these techniques are no longer as powerful as they once were then I'm curious to know why.

Many commodity, FX and indices have shown significant and prolonged trends in the past few years - indeed 2002 and the first 5 months of this year have also provided rich and powerful trends on many diverse and uncorrelated markets. Many of these would have been picked up by a trend follower. The question is whether the many, unavoidable losses incurred whilst waiting for the big wave are compensated by the highly pyramided profits when they do come?

Also, Mr Chart explained that today's markets make this type of method much harder due to traders fading break-outs. I find this hard to rationalise. Surely in a market like EURO/USD it is balance of trade deficits, economic uncertainty, war/terrorist threats, asset allocations and other large macro-economic factor that are driving large trends. Although day-tradrs can fade breakouts and make money from them on short-term basis this type of trading can't hnge the maco-ecomomic drivers causing the changes in the first place. For example, there are many deeply embedded forces exerting downward pressure on the USD. I see this trend as a enormous blue whale and the fading day traders as pilot fish swimming along side and opportunistically pecking a tasty morsel from between its various crevices (!!). They can gain short term benefit but they can't alter it's course or prevent it's progress.

Please don't misunderstand me. I am not a fundamental trader. I trade technically but also realise that, especially in the commodities/FX markets that it is macro-economics that drive markets. So, if Mr Charts was totally correct, how would here ever be any trends at all? Surely charts would approach a theoretical mathematical randomness as every trader faded ever less significant and identifiable trends that developed.

That large and significant trends still exist can not be denied. The question is whether money can still be made trading breakouts and losing small amounts the majority of the time whilst you wait to be on-board right at the start of any new trends?

I would sincerely welcome any opinion.


PS - I was surprised that no one replied to darrenf's call to hear from position/longer term traders. There must be some, or at least I hope so because I still have a 9-5 and my only hope is learning to position/trend/swing trade with EOD data.

PPS casseopeia - your 50% return with 3% drawdown is extremely impresive and a reord most hedge fund managers would be very envious of.

PPPS - Pls excuse the whale analogies - it's very late and they had an excellent deal on the Summer Ale at the local offi!!
"Mr Charts felt that trend following techniques no longer worked. "
I didn't say that!
"So, if Mr Charts was totally correct, how would here ever be any trends at all?"
I didn't say that either!
I didn't say trends don't work, merely that the Turtles system "doesn't work in this sort of market environment "
I alluded to the reasons why I think the market has changed since the Eighties.
I do normally try to choose my words with care as in this medium it is easy to misunderstand without the visual and aural clues of face to face contact, and looking back I think I did express exactly what I meant. Perhaps it was your summer ale? ;-)
If I'm not expressing myself well enough please say so, no offence will be taken and I'll try harder still to be more precise without sounding too pedantic ;-)
Have a good day,
Mr C

I also perceived your comments re the turtle system not working "in the current market environment" the same way as fastnet. ie I took it that you meant "the turtle system would not work in todays markets" full stop. Clearly you did not mean this but could you clarify what you mean exactly by "the current market environment".

As also mentioned by fastnet, there have been some very good and extended trends in various markets recently. Even if day traders fade the turtle entry signal, this does not mean the longer term trend will not develop anyway? (as per fastnet's whale analogy).

PS. Glad to see some discussion on this developing.
'PS - I was surprised that no one replied to darrenf's call to hear from position/longer term traders. There must be some, or at least I hope so because I still have a 9-5 and my only hope is learning to position/trend/swing trade with EOD data.'

Sorry gents (I presume), too busy sleeping (one of the drawbacks associated with this type of trading).

I've been 'trading' utilising a fairly simple methodology based upon the most basic & crudest TA for the past six-months or so, which has yielded a bit of pocket money. It could have been substantially more, however my b******s aren't sturdy enough to cope with the not insignificant draw-downs inherent to this type of trading, yet.
OK guys, look at this chart of the Dow and see how the nature of the market has changed since the late Eighties............


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Mr Charts.

I think a fairer comparison would be on a log scale and with two charts one scaled for the 1980's and one for the last ten years.

Mr Charts,

I am a trend follower and a long term trader (like the turtles although I have my own methodology).

You should compare apples with apples. If you are looking at an annual chart, entry and exit are based on the same data.

Had anyone used turtle principles to get on board the dow using the chart you put there, plenty of money would have been made. Using the turtle rules on the chart you supplied, one would have entered around 1994 and exited around 2001. Not a bad trade really - picked up most of the boom - even though I don't know anyone who trades using end of year data ;-)

In my opinion, the markets haven't changed. They are simply more volatile. Long term trend followers like me use the volatility as part of our trading methodology.

There have there been huge trends in the DOW, SP, Nasdaq, Dax, FTSE, Cocoa, AUD, USD, EUR, GBP, Gold, Oil etc as well as in plenty of stocks over the last few years. We took advantage of many of them and continue to do so.

A good trend following system will keep you in the good trades and get you out of the poor trades.

Whilst I do not believe that markets have changed, I do support the theory that expectations of the average player certainly has. It is no longer enough to aim for the 30% pa returns like professionals, most punters are looking to make a full time living trading 20K in capital. A situation that more often than not ends in tears ;-( and leads to questions of where is the holy grail?

I trade with EOD data and have done for many years. Every one of my trading years have been profitable (some more than others) using a long term trend following technique. Most don't have the patience to trade this way but if sleeping well and making steady profits appeals then longer term trend following has lost none of it's overall profitability.

I actually wrote a book on the subject of trend following and trading methodology for some clients (I am a licensed financial adviser) recently to help them understand the principles and why it is still a valid trading methodology. Not trying to convert anyone but for those who want to pursue long term trend following, I believe you are on the right track.

Good trading
We actually agree here.
It's a matter of semantics as we both say there is much increased volatility thereby implying a change in the nature of the markets.
Trend following specific instruments will always work over specific time frames, indeed that is vital and integral to my own trading
My point, "It doesn't work in this sort of market environment" refers specifically to the OVERALL market and Turtle trading concepts, AT THIS TIME, NOT to specific instruments, nor to longer time frames. Capitals are for emphasis, not shouting ;-)
There are better ways of trading these markets than Turtle trading, selling strangles for longer term players, for example.
I'm attaching a chart of the Dow over the last year or so which hopefully further illustrates the point.
The increased volatility means greater drawdowns and more whipsaws for most players on this board when markets are ranging. For people like me intra-day volatility is great when there is some short term follow through and for options players selling volatility.
I don't hold any long term positions myself but do manage our children's portfolios over longer time scales using many factors, the main one of which is Relative Strength (not RSI) so I understand exactly where you are coming from and agree with you. Thank you for your imput. Do you trade Oz or US? My friends in Oz and NZ who trade the US intraday don't seem to need much sleep ;-)


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Thanks all for your comments.

I take on board Mr C's comments regarding the DOW etc. Certainly volatility has increased and yes, the major stock indices have been pretty range bound for a while now which makes them difficult to trade from a longer term trend following perspective.

However, Aussietrader, you seem to be coming from exactly my perspective. There are many other markets to trade. When stock indices are rangebound, there will be developing trends in other markets. I have made some profits recently in currencies, particularly eur/usd and usd/cad. It's good to know there are actually likeminded, succesful longer term traders out there working along the same lines.

It would seem many who day trade seem to concentrate on a particular market. ie S&P/ DOW/ nasdaq stocks. This seems to be because you need to learn the peculiarities of the relevant intraday movements/ characteristics of the particular market/ instrument in order to extract the most profit.

For the longer term trader, intraday movements are less important. The skill is identifying trends accross a wider range of markets.

I have looked in detail at the turtle rules. It would seem a good place to start in developing a trend following strategy. However, as has been said many times before on these boards, every trader should develop their own system as only they can be 100% happy with it. It is not too dis- similar to my own methods although much more aggressive from a pyramiding perspective. I will use it as a refernce point more than anything.

I think the points raised in this thread show that it is possible to be a succesful trader whether intraday, or longer term trend following. As for whether the extra time spent daytrading leads to directly proportional higher returns, the question seems to remain unanswered. I would still aspire to trading full time at some point in the future so maybe I'll find the answer to this myself then. For now, I'll stick to part time, longer term trading and see what sort of returns I can make within my own risk paramaters.

Thanks all again.

PS. Any further comments welcome.
Hi, I have only just come across this website and must say that it is very beneficial to be able to see other peoples opinions and thoughts about different aspects of trading. I am only a beginner in this field and would like to ask if anybody trades using the Turtle Trading System. The reason for asking is that I have received literature about a 2 day training course with Russell J Sands, one of the original Turtle Traders, but it is very expensive. Has anyone attended ones of these courses and if so what did you think about the course and the system of trading :confused: