Turtle Trading Rules

Chapter 1 Prologue

Just as I was finishing the second edition of my Trade Your Way to Financial Freedom, my editor asked me to recommend a new author for McGraw-Hill.The first person that popped into my head was Curtis Faith.Curtis was the most successful of the Turtle factions[1].

After the initial training period, Curtis was the only one who fully captured the prevailing market trends.According to Stanley Angrist in the Wall Street Journal, during Richard Dennis' Turtle Project, Curtis was in charge of one of the largest accounts, earning Dennis more than $3100 million.And, much like me, Curtis took a different path after his Turtle career.It can be seen that he believes in himself more than the mainstream world or Wall Street.

Who better to write a book for McGraw-Hill?After recommending Curtis, I didn't think much about it until someone asked me to introduce a new book called "Turtle Trading Rules".Hey!Coincidentally, this is Curtis's book.I read the 70 or so pages of the unedited draft and realized right away that the book needed a preface, and I would have loved to have written the preface.Why?Since in my opinion this is one of the top 5 books on trading ever written, I would recommend all my clients to read it.

I almost became one of the first Turtles, and because of that, I've always followed their success stories with special interest. In September 1983, I started trading training.It's only a part-time job, because I'm still a researcher in psychology.But at the time, I considered myself a pretty good trading coach.I have invented a test that can judge a person's ability to trade and is a good predictor of whether a person will be successful. I call it the investment psychology test.There are many traders who have taken this test and all agree with my assessment of their strengths and weaknesses.

It was about this time that I saw a full-page ad for Richard Dennis in the paper of a major news organization.He planned to select a dozen traders, teach them his method, and give each of them $100 million to trade.The temptation was too great to resist, and I reckon thousands of people would apply.So I thought, this is a good opportunity for me too, because my psychological test of investing can come in handy.They're picking a dozen out of thousands, and I can help.So I contacted C&D Commodities in Chicago and sent them a copy of the test.Dale Drutri (C&D Business Manager) and Richard Dennis were both tested, but that's about it.

However, they also sent me a copy of their test questions, which consisted of 63 true-false questions and 11 short-answer questions.Their questions resemble the following style:

True False: Most traders are wrong all the time (the word "always" makes this question difficult to answer).

Quiz: Name a risky thing you did and why you did it.

I was intrigued by the test and sent them my answers.To my surprise, I got an interview invitation from them because of it.So I went to Chicago to apply for the Turtles.There, I was asked a lot of questions, like: "If the market is random, how does one trade?" I can't remember how I answered it, but if I were to answer this question now, the answer would be Maybe it's not the same as it was back then.I was told that from a pool of 40 candidates 10 would be selected and they would be trained by Richard Dennis and Bill (William) Eckhart[2].The 10 will be signed to a five-year contract, but the contract can be terminated at any time if the performance is not good.

I didn't make the final 10 and I know why.Facing that opportunity, I was actually conflicted.I got involved in this only because I wanted to help C&D Futures test candidates.I live in Southern California and really don't want to move to Chicago for 5 years.If I moved to Chicago, I think I'd definitely want to keep my wife and son in California, though that's just speculation.I also loved what I was doing at the time - being a trading coach and starting a new career.As valuable as being a Turtle might be in achieving that goal, I didn't want to give up my coaching job.Finally, I also didn't want to be in Chicago for training the last two weeks of the year (Christmas and New Years).I guess my inner struggles were all too obvious in the interview, so I wasn't selected.

However, I also have some regrets about not being selected, especially after hearing and seeing the brilliant achievements of the Turtles.Because of this, I've always wondered what the Turtles learned.Over the years, I have interacted with several of them regularly and learned the essence of their trading methods.I also present a more general form of their position sizing algorithm in my trading systems training course and in my book The Definitive Guide to Expectancy and Position Sizing.I never thought there was anything special about the system they used.In my opinion, their success is entirely due to their state of mind and the laws of position sizing.The sea turtles must abide by the 10-year confidentiality agreement, and this mysterious veil makes the sea turtle myth even more fascinating.Most people believe that the turtles must have some kind of magical secret that will never be revealed to the public.

Why do I think this book is one of the top 5 books on trading in history?
First, it spells out what is necessary for successful trading.Curtis pointedly said that what is important is not the trading system, but the ability of the trader to implement the trading system.Curtis made $78000 during the Turtles' initial training period, almost three times as much as the others, but the methods they learned were exactly the same.Why are 3 people learning the same set of rules, including the fixed position size rule, so different results?Curtis said some of the other Turtles thought Richard was giving him special information, but both Curtis and I knew that trading psychology made the difference.

When I studied psychology in the late 20s, the emphasis in psychology was on the behavioral sciences.Psychology courses aim to come up with a set of laws that answer the question: If you stimulate a person in a certain way, how does that person react?In my opinion, this approach is pure rubbish, so I am very happy when academics start to study the psychology of risk.The ultimate conclusion of that study was that humans take a lot of shortcuts in the decision-making process, and that's what makes humans very ineffective decision makers.Since then, an entire field of behavioral economics has grown from this study.

Second, another fascinating aspect of this book is that it explains, in the most accessible language I have ever seen, how certain principles of behavioral finance apply to and affect trading.Curtis even discusses at length the support and resistance mechanisms of the market and why they exist because of the inefficiency of our decisions.This is required reading.

This book attaches great importance to game theory and uses game theory to explain the correct way of thinking of a trader. This is its third feature that I like very much.For example, it believes that traders should focus on the current year's transactions and forget about the past and the future.Why?Because historical experience tells you that you may be wrong most of the time, but your profits will be far greater than your losses.This means that the expected value is positive.Curtis tells readers that they must understand the desired outcome of their trading system and have confidence in that outcome.In the long run, that confidence is their winning formula.

Other great themes include:

How the turtles were trained and what exactly they learned.

The real "secret" of the Turtles (I've already given a lot of hints).

Problems in system development, why people make mistakes in system development because they do not understand the basic statistical principles in sampling theory.

Why most systems underperform.Even though most good systems are rejected for psychological reasons, there are also bad systems that look good on the surface.If you want to know why they look good, and how to spot such bad systems, you must read this book.

Systematic effective metrics.If you want to design an effective long-term system for yourself, after understanding this part, you have taken a big step forward.

Combine this with Curtis's many stories from his Turtle career, plus his uncanny ability to synthesize a lifetime of experience and get to the core, and you have a book like this.This is a must-read for all professional traders, and anyone who wants to put their money into the markets.

Project Turtle started out as a bet between Richard Dennis and Bill Eckhart to see if the skills of the trade could be taught.Richard was willing to put his own money on the bet, believing that trading skills could be taught.In "Turtle Trading Rules", Curtis gives his own view on the ultimate outcome of this bet (maybe not the same as you think), but when you think about his views, I hope you think again Thing: Out of thousands of applicants, only 40 people get interview opportunities, and only a small percentage of 40 interviewers are selected.Combine this with what Curtis said about sampling methods, and I believe you have a real answer to the question of whether a person can learn to trade.

Dr. Van Tharp

Trading Coach, President of Van Tharp Academy
[1] The famous trading guru Richard Dennis wanted to find out whether great traders are born or cultivated. To this end, in 1983 he recruited 13 people and taught them the basic concepts of futures trading, as well as His own trading methods and principles, the trainees are called "Turtles".This became the most famous experiment in the history of trading, because in the next 4 years, the Turtles achieved an average annual compounded return of 80%.Dennis proved that with a simple set of systems and rules, people with little or no trading experience can be made great traders.At the time, the Turtles held Richard Dennis responsible and agreed not to reveal the rules after their agreed 10-year non-disclosure agreement ended in 1993.However, there are individual turtles who make money by selling turtle trading rules on the website.The two original turtles, Curtis Feith (the author of this book) and Arthur Maddock decided to put the Turtle Trading Rules on the website in order to prevent individual turtles from stealing intellectual property and selling the Turtle Trading Rules Free to the public.The turtle trading rules we can see now are derived from this. ——Editor's note
[2] Bill is William's nickname. ——Editor's Note Preface More than 20 years ago, I was part of a great experiment.To this day, this experiment has become a legend among traders and investors.The experiment, dubbed "The Turtle," arose out of a bet between Richard Dennis and Bill Eckhart, friends and well-known master traders.

In this book I will tell the story of that time, and what I have learned since then.I hope one day another Turtle will write bits and pieces of that period in more detail.But this book is not that kind of book.I was only 19 years old, and I was like an outsider to the other turtles, so I am not in a position to recall our shared experience now.At that age, I was also unaware of the human-relationship stuff that goes on among the turtles who live together day and night and compete for survival.

I will review my experience and learning process as a Turtle.This book will recreate the entire experiment and tell you what we learned and how we traded.This book details some of our biggest trades and the rules of their timing, dissecting the secrets to making millions in the market.For me, this book is a story of trading, but also a story of life, especially if you look at life in the way of an outstanding trader, it will bring you more fun and richer experience, and much less regret.

In addition to this question, the following chapters will explore the following topics:

How do the turtles make money: The turtle trading method has allowed me to obtain an average annual rate of return of more than 4% in the 100-year turtle plan. What is the core of this method?
Why Some Turtles Make More Money Than Others: Some Turtles are wildly successful, while others lose money despite having the exact same knowledge. Why?
How to Apply the Turtle Trading Rules to Stocks and Forex Trading: How can we use the rules we follow to discover core strategies that apply to any trading market?

How can you apply the Turtle Trading Rules to your own trading and life?

(End of this chapter)