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Turtle Trading 1.0

Turtle Trading 1.0

The Turtle Trading Indicator implements the original Richard Dennis and Bill Eckhart trading system, commonly known as The Turtle Trader. It implements the two breakout systems in a single indicator

  • Trade exactly like the original Turtles did
  • Make sure to capture all big market movements
  • Follow trends to the end and profit in up or down markets
  • Get home run returns applying a proven trend following system

This trend following system relies on breakouts of historical highs and lows to take and close trades: it is the complete opposite to the buy low and sell high approach.

  • It is the perfect system for novice traders with low capital
  • The indicator implements visual alerts
  • The indicator is non-repainting

Who were the Turtle Traders?

The Turtle Trader legend began with a bet between American multi-millionaire commodities trader, Richard Dennis and his business partner, William Eckhardt. Dennis believed that traders could be taught to be great; Eckhardt disagreed asserting that genetics were the determining factor and that skilled traders were born with an innate sense of timing and a gift for reading market trends. What transpired in 1983-1984 became one of the most famous experiments in trading history. Averaging 80% per year, the program was a success, showing that anyone with a good set of rules and sufficient funds could be a successful trader.

In mid-1983, Richard Dennis put an advertisement in the Wall Street Journal stating that he was seeking applicants to train in his proprietary trading concepts and that experience was unnecessary. In all he took on around 21 men and two women from diverse backgrounds. The group of traders were shoved into a large sparsely furnished room in downtown Chicago and for two weeks Dennis taught them the rudiments of futures trading. Almost every single one of them became a profitable trader, and made a little fortune in the years to come.

The entry strategy

The Turtles learned two breakout variants or "systems". System One (S1) used a 20-day price breakout for entry. However, the entry was filtered by a rule that was designed to increase the odds of catching a big trend, which states that a trading signal should be ignored if the last signal was profitable.
But this filter rule had a built-in problem. What if the Turtles skipped the entry breakout and that skipped breakout was the beginning of a huge and profitable trend that roared up or down? Not good to be on the sidelines with a market taking off!

If the Turtles skipped a System One 20-day breakout and the market kept trending, they could and would get back in at the System Two (S2) 55-day breakout. This fail-safe System Two breakout was how the Turtles kept from missing big trends that were filtered out.

The entry strategy using System Two is as follows:

  • Buy a 55-day breakout if we are not in the market
  • Short a 55-day breakout if we are not in the market

The entry strategy using System One is as follows:

  • Buy a 20-day breakouts if last S1 signal was a loss
  • Short a 20-day breakouts if last S1 signal was a loss

The Turtles calculated the stop-loss for all trades using the Average True Range of the last 30 days, a value which they called N. Initial stop-loss was always ATR(30) * 2, or in their words, two volatility units. Additionally, the Turtles would pile profits back into winning trades to maximize their winnings, commonly known as pyramiding. They could pyramid a maximum of 4 trades separated from each other by 1/2 volatility unit.

The exit strategy

The Turtles learned to exit their trades using breakouts in the opposite direction, which allowed them to ride very long trends.

The exit strategy using System Two is as follows:

  • Exit long positions when the price touches a 20-day low
  • Close shorts positions when the price touches a 20-day high

The exit strategy using System One is as follows:

  • Close long positions if/when the price touches 10-day low
  • Close short positions if/when the price touches a 10-day high

Money Management

The initial risk allocation for all trades was 2%. However, aggressive pyramiding of more and more units had a downside: if no big trend materialized, then those little losses from false break-outs would eat away even faster at the Turtles' limited capital.

How did Eckhardt teach the Turtles to handle losing streaks and protect capital? They cut back their unit sizes dramatically. When markets turned around, this preventive behavior of reducing units increased the likelihood of a quick recovery, getting back to making big money again.

The rules were simple. For every 10 percent in drawdown in their account, Turtles cut their trading unit risk by 20 percent. This of course applies for bigger numbers: the unit risk would be decreased by 80% with a 40% drawdown!

Mar 25
Notas de prensa: Added improvements
Apr 28
Notas de prensa: Improved algorithm
Apr 28
Notas de prensa: Improved algorithm
Jun 18
Notas de prensa: Improved algorithm
Nov 26
Notas de prensa: Improved algorithm
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Great resource, thanks! Will be much easier than having to calculate myself. Reading the turtle books now, the only thing I'm stumped on is position sizing with the use of ATR. One "unit" would be 1% of total account divided by ATR?
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To add alerts simply select:
* Alert - Turtle Trading 1.0 - VIP Buy Signal
* Alert - Turtle Trading 1.0 - VIP Sell Signal
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how do you add the alert? There is no buy or sell alert in the alert code in trading view.
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rubend18 theccinc
@theccinc, You can select: VIP Buy Signal, VIP Sell Signal... Best regards...
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