Turtle Trading Rules

Chapter 2 Introduction
lucky day

In your lifetime, you may only experience so many milestone moments.And when I was 19 years old, I experienced two such moments on the same day: I saw the Art Deco building of the Chicago Board of Trade (CBOT) for the first time in my life, and I saw the Chad Dennis - the legendary master trader.

The Chicago Board of Trade is the most famous sight in Chicago.You can see the building from 1.6 kilometers away, at 141 West Jackson Street, topped by a lone statue of Ceres, the Roman goddess of agriculture.Surrounded by other skyscrapers, the 45-story tower stands proudly as the ideal home for the famous exchange.Inside the building were the trading halls, where traders crowded shoulder to shoulder, buying and selling grain, meat and foreign exchange worth millions of dollars in a chaotic shout and complex body signals.This well-organized but noisy scene daunts the thousands of visitors who visit every day, and for traders, this is the Holy Land Mecca.

As I step into the elevator at 141 West Jackson Avenue, my palms start to sweat.I was only 19 years old, and I was going to meet Richard Dennis, one of the most famous futures speculators in the world.Dennis was already a big name in the futures world before the turtle experiment became famous all over the world.He was known as the "Prince of the Trading Floor" because he had turned his initial few thousand dollars into hundreds of millions by the time he was in his 30s.

后来，我才知道能够登上那部电梯是件多么幸运的事。有超过1000个人应聘了那个位置，但只有40个人有幸与丹尼斯面谈。而且只有13个人（不到1/100）最终被选中，另有10个人被选中参加下一年的一个后续计划。

Long before Donald Trump's The Apprentice and other such reality TV contests, Dennis directed one of his own.It all started with a debate between him and his good friend Bill Eckhart (a great trader who was as successful as Dennis)—whether great traders are born or made.While Dennis believed he could turn almost anyone into a good trader, Eckhart believed it was a matter of talent, not development.Dennis was willing to use his own money to prove his words, so the two made a bet.

To do this, they took out big ads in the Wall Street Journal, Barron's, and the New York Times, announcing that Dennis was looking for trainees to whom he would teach his trading methods, and then give each of them a $100 million trading account.

At that time, I didn't understand the significance of this ad.By placing the ad and continuing the gamble, Dennis is making a bold statement.He believed that he knew why he was successful, so he could train others to be as good as he was—even if they were total strangers with no prior trading experience.He was so confident in his judgment that he was willing to spend his millions to prove it.

Dennis's trainees, myself included, were so successful that they became legends in the industry.From then on, they began to be called sea turtles.In four and a half years, the Turtles achieved an average annual rate of return of more than 80%.Why use the word turtle?In fact, the name comes from a place Dennis and Eckhart visited: a turtle farm in Singapore.It was there that their long-standing argument became serious.It is said that when Dennis was concentrating on observing the turtle farm, he suddenly blurted out such a sentence: "We want to train traders, just like Singaporeans raise turtles."

That's how I got the chance to climb that elevator at the age of 19, sweaty palms, ready to meet the "Prince of the Trading Floor."Walking down the hall, I shouldn't have been surprised by the utilitarian look of those offices.There were no grand gates, no grand halls, no elaborate decorations of any kind to show off to clients, brokers, or any other dignitary.Dennis' reluctance to waste money on pomp and pomp was a well-known trait, so the austere surroundings were no surprise.But even so, I was a little surprised—everything seemed a little smaller than I expected.

I found the door with the "C&D Futures Company" sign on it, opened it and walked in.

Dale Drewtree, Dennis' business director, greeted me at the door and told me that Dennis' last interview was coming to an end.I know what Richard looks like because I've seen pictures of him in several articles, but I don't know much about his personality, which makes me a little uneasy.

In preparing for this interview, I had read everything I could find about Richard, so I knew a thing or two about his personality, but not enough.I've also done Richard's "40-question test" (as part of the hiring process), so I have an idea of ​​what he values.

The door to Richard's office finally opened, and the previous interviewer came out, told me about his interview, and wished me luck.I figured he must be doing well because I saw him at his first training session in a few weeks.I went into that office and met Richard and his partner, Bill Eckhart—we've since called them Rich and Bill, and I'm still used to calling them that.Rich was a big man, pleasant-faced, and suave.Bill is thin and of medium build.He looked and dressed like an applied mathematics professor at the University of Chicago.

The content of the interview matched the written test questions I received from C&D Futures.Rich was interested in my theory of the market and why I thought it was possible to make money trading the market.They were all interested in the details in my background.In retrospect, my background was indeed somewhat unusual.Even today, few 19-year-olds have had the experience I have had, at least with regard to futures trading methods.

In the fall of 1983, very few people had a personal computer. In fact, the personal computer was only recently invented.But for the previous two years, I had been programming an Apple II as part-time job outside of school.My program analyzed what we would today call a "system": a stock or futures trading strategy with well-defined rules that precisely timed buying and selling in response to changes in market prices.I wrote thirty or forty different programs in those two years, they can use historical data to test the trading system, and test the effect of these systems applied to different markets.I realized later that this was cutting-edge research in 1983.

What started as a fun side job turned into a wild hobby.I was working for a small firm called Harvard Investment Services in the kitchen of a small house in Harvard, Massachusetts.Harvardtown, 64 kilometers west of Boston, is the quintessential New England town: apple orchards, a small library, a town hall, and a town square.There were only three people at Harvard Investment Services: George Arndt (the owner of that kitchen and that company, our boss), my friend Tim Arnold, and me.Tim and I do the odd jobs.

It was George who first got me interested in trading.He lent me his private copy of Reminiscences of a Stock Operator, Edwin Lefèvre's novelistic biography of the famous speculator Jesse Lever The story of Jesse Livermore.I don't know whether it was Le Fevere's wonderful pen or Livermore's legendary color that moved me. In short, after reading this book, I was fascinated.I aspire to be a trader.I believe I have what it takes to be a great trader, and I will be a great trader.I brought that confidence to my interviews with Rich and Bill, only a 19-year-old like me.

It turned out that experience analyzing trading systems was an excellent preparation for that interview and the training sessions that followed.I believe my background was a big part of the reason I was able to adopt Rich and Bill's methods faster and more confidently than other trainees and made more money for Rich than any of the other Turtles.I had more faith in their methods and concepts of systematic trading than any other Turtle from the start.

Rich's belief that I could succeed and be able to reach my potential in the trading world also played a big role in my belief.My background allowed me to do what other turtles couldn't: follow the simple rules we learned during our two-week training sessions.It may sound strange that none of the other turtles fully obeyed these laws during the first month, but I'll tell you why later.

At first, I worried that not having any real trading experience might be a disadvantage for me.My system testing experience may be an advantage, which can somewhat offset this disadvantage, but my lack of actual combat experience is still a big concern for me.It was clear from Rich and Bill's interview questions that they were testing our intelligence and reasoning skills.This is not surprising, since one of the questions in the pre-interview questionnaire was about our SAT [3] scores, and there were other questions designed to gauge our intelligence levels.What really amazed me was that they were interested in not only what I "believed" but also "what I didn't believe" about the trading industry.

When we talked about a certain issue, I began to believe that I was going to be admitted.I still remember that moment clearly.We were talking at the time about my suspicions of a general mentality: Too many people believe that there is some sort of mystical touchstone that can help a person magically predict the movement of the market, but I think that something as complicated as the price of wheat or gold There are too many factors involved, and no prediction will help. Those who want to find the philosopher's stone are doomed to be disappointed.

As an example, I told them a story that George told me: There is a glass plate with many curves and straight lines on it. You can draw a price chart on the plate. Magically aligning with those lines, and looking at those lines, it's as if the market is responding to some mysterious rule.They seemed to like my story, and at that moment I thought, "I'm done".

I was right - guessed a few things right.I did get accepted, and Rich and Bill really tested our aptitude and intelligence levels.They pick people who share certain characteristics because they believe these characteristics are essential for a successful trader.They are also good scientists, and for experimental purposes, they deliberately considered the dispersion of personnel backgrounds when they formed the so-called turtle class.Take a look at some of the members of the first turtle class:

A man who is very interested in gambling and all games.Interestingly, he was also the editor of the Dungeon Master's Guide, the game manual for the role-playing game Dungeons & Dragons.In the early 20s, it was a hugely popular game.

A man with a Ph.D. in linguistics from the University of Chicago.

A grain trader at Cargill who had also been a Massachusetts state chess champion while in school.

Several people with trading experience.

an accountant.

A professional blackjack and backgammon player.

Most of these people are among the smartest people I've ever met.Rich and Bill clearly place a high emphasis on high IQs, with a particular emphasis on math and analytical skills.Rich later stated in an interview that they were looking for "absolutely smart" people, and since there were so many applicants, there was room for them to nitpick.Extreme intelligence is a common trait of many turtles, but not all of them.Moreover, I don't think our intellect is necessarily related to our ultimate success or failure.The Turtles also have a common feature: they all have a background in game theory and strategy, and they all have a lot of research on probability in gambling games.We'll soon see why Rich and Bill focus on these traits.

A few weeks after the interview, I got a call from Rich that I had been accepted into the training program.I must have acted less than excited at the time, because Rich told me later that, of all the trainees who had been accepted, I was the only one who wasn't quite ecstatic.He didn't even know if I was going to be in that training session or not.

Rich told me that the training would take place in the last two weeks of the year and that after the two weeks of training we would start trading on a small account.If we did well for an initial trial period, he would give us each a $100 million trading account.

It may come as a surprise to some that Rich believes he can develop a group of traders in two weeks.But now it looks like the real surprise to me is that it took him two weeks.In fact, Rich and Bill recruited another batch of turtles the following year and completed the training in just one week.The difficulty of trading lies not in the concept, but in the application.Learning how to trade is relatively easy, but applying what you learn to real trading is very difficult.

At the end of the month-long trial period, Rich assessed our performance.Some of the Turtles got the full $100 million account, others with less than $100 million, and still others to continue trading with their original accounts.Rich gave me a $200 million account, and it was the largest account I had throughout Project Turtle.

In this book, I'll tell you why Rich was able to assess our relative capabilities after only one month, what he was watching, and why he gave me an account that was far greater than any other Turtle.Richie discovered an ability early on in me and eventually in many others—an ability that I call the Turtle Way.

Before revealing the ways of the turtles, allow me to introduce the trading industry as a whole so that readers can understand the background of the turtle story.In addition, I want to talk about some psychological reasons why the Turtles are so successful and why good traders can make money.The next two chapters are the foundation of Chapter 3. From Chapter 3 onwards, we will return to the turtle story and explore the details of the turtle ways one by one.

[3] SAT is the abbreviation of Scholastic Assessment Test. It is a test that American high school students must take to enter American universities. Its importance is equivalent to China's college entrance examination. An important reference to get a scholarship. ——Editor's note
(End of this chapter)