Turtle Trading Rules

Chapter 28

The market doesn't care how you feel.It will neither flatter you when you are elated nor comfort you when you are down.So, the trading world is not for everyone.If you are not willing to accept the reality of the market and admit your flaws, fears and failures, you will not succeed.

I hope the stories of the Turtles will inspire some readers in the same way that I have been inspired by the stories of the great speculator Jesse Livermore - I aspired to be a trader since I first started trading in Edwin in 1982. Le Fevere's "Memoirs of a Stock Operator" read the beginning of the legend of Livermore.The dozen or so Turtles Richard Dennis bred in just two weeks that earned him more than $4 million over the next four years have become one of the most talked about stories in the trading world. one.The Turtle experiment has proven that Richard has a set of teachable principles that can make you a successful trader if you follow them steadfastly.

Interestingly, most of the principles Richard taught us were not new concepts.Some are just fundamentals, taught by other famous traders long before Richard was born.But it was the simplicity of the principles that prevented the Turtles from following them in the first few months.

People tend to think that complex ideas are better than simple ones.A lot of people just can't believe that Richard Dennis made hundreds of millions of dollars with just a few simple rules.It is natural to suspect that he has some hidden secrets, and at first, not a few Turtles had such suspicions.Some people think that successful trading cannot be so simple, there must be other secrets.This kind of thinking influenced some Turtles so much that they never strictly followed the simple rules Richard taught.

In my opinion, this suspicion and complicating tendencies come from a sense of insecurity, and it is precisely because of insecurity that people will pursue something different.Holding on to little-known secrets can set us apart, but holding on to simple truths is not uncommon.So our egos drive us to believe we have some special knowledge, just to prove to ourselves that we are better than other people.Our ego does not allow us to limit ourselves to the facts that everyone knows, the ego wants the secret.

overcoming ego
Ego is the reason novices like to trade on their own.In systematic trading, decisions are made based on mechanical rules that clearly define when to buy and how much to sell.In contrast, self-directed trading can give people a sense of self-esteem because it relies on one's subjective judgment.So if you make a successful trade based on your own judgment, your ego is gratified.You can brag to your friends how good you are in the market.

I see this all the time in online trading forums, especially the more general ones that are popular with newbies.You can often see people posting bragging: so-and-so bought just before the rise; so-and-so discovered the "Holy Grail" and now has a system with a 90% correct rate; 3% rate of return etc.They rely on high leverage without exception, so it is entirely possible that they have turned $200 into $5000, but such an aggressive transaction can easily lose that $15000.Often within a few months, these traders are beaten back to their original form, posting in dismay that they have lost it all.They choose to trade independently only to satisfy their own ego, as the saying goes, "Success is also conceited, and failure is also conceited."

Of course, there are many successful independent traders, but there are far more losers than winners.Ego is not a good thing for a trader.The egotistical person who wants everything to be right, who wants to see the future, who wants to know the secrets, will have difficulty avoiding the trader's great enemy - cognitive bias.

Let me give you an example from the Turtle Age.

table tennis fight

Futures trading is a very exciting thing in the eyes of outsiders, so you may find it hard to believe that most of the time we turtles have nothing to do and are boring.Because the market is calm most of the time.Simply put, Turtles have a lot of free time.

Luckily, we had a ping pong table, so playing ping pong became our hobby.Almost all turtles played ping pong at least once a day.We played so crazy that someone in the big office of the insurance company next door put a "death notice" on our door, because they were working hard from morning to night, and we were working from morning to night. (presumably they don't like their jobs that much either).

I hadn't played table tennis very well before that, but after a few months I improved a little and started to beat some of the best players.I play the penhold Chinese style, so I can switch between forehand and backhand more easily - which suits my attacking spin style very well.

But there was one Turtle who was much stronger than all the others, and no one was his match.He has been a veteran for many years. Whenever he plays, others will stop respectfully and watch.Generally speaking, he can easily beat us by 21:10 or even more, and we know he is just teasing us.He beat us so effortlessly.

A few months later, one of the Turtles suggested a tournament.This is serious business for a group of competitive-minded traders.We all feel that the real meaning of this tournament is to determine the second best player, because there is no doubt about who the first best player is.However, we still want to see who will be the champion.The tournament started, and the weak were eliminated one by one until the 8 strongest remained.Except for the No. 7 master, the other [-] people's levels are evenly matched.

For this competition, I decided to change the style.Instead of smashing hard at every opportunity like before, I adopted a conservative style of play.I even changed the penhold grip to the traditional penhold grip, and changed the high-elasticity racket that is good for spinning the ball into a high-grinding racket that is good for defensive spin.I know that the number one player has great spin, and he has no problem dealing with my limp spin, so when I face him, it is best to focus on defense and use the racket to weaken his spin. ball advantage.

With this strategy, I made it to the final, beating out two opponents in two very close contests, which meant I was going to a showdown with the favorite for the championship.I can only do my best, and unless he makes a mistake himself, I have no chance of winning.We all know that.All the Turtles watched the finals, a contest of youth and vigor versus experience and skill.

One thing I noticed when the game started: my opponent wanted to win so badly because he was so nervous.Obviously, winning is very important to him.He can't afford to lose, because he has already been regarded as a super player and the number one master.On the contrary, I have nothing to lose.From the perspective of others, I was a big win in the finals, no one expected me to win the finals, no one even thought that I could win.

He won the first few rounds so easily, so easily, that I began to worry that I would "eat a duck's egg".But as I got used to his super fast speed and the way he played, and played him super conservatively, he started to wear off.He attacks harder than usual because he wants to end the fight earlier.My defense was more conservative than usual because I knew it was my only chance.We got longer and longer, and eventually, I started scoring - not much at first, but enough to keep me from being kicked out.As I scored more and more points, my opponents got confused.He began to feel sorry for himself because he couldn't stand an opponent who was inferior to him to gain any advantage.

Gradually, the balance of the advantage began to tilt in my favor, and I finally turned the tide in the second game.

I tied the score first, and then won the second game in one go.In this way, the total score became a 1:1 tie, but in the final of the best of three games, the momentum of the game was in my favor.

The tiebreaker was a tough fight.The two of us were back and forth, deadlocked, and each had reached the point several times where one more point would win.In the end, I dunked a lore and he couldn't catch it.Ultimately, he was crushed by the pressure of the tournament—the pressure to prove he was better than everyone else.Of course he was the strongest one, I knew it, and he knew it, but in the end, it didn't matter anymore, he lost to me because he couldn't bear the pressure.Winning was so important to him that it affected his performance.

My super-adversary was also less successful with Project Turtle.I don't think the reason is any different than he lost the tournament.Because of his ego, he doesn't realize that his poor performance comes from himself.Not coincidentally, it was the same table tennis expert who suspected Ricky had secretly passed on some of his secrets to me.He won't understand why I'm making money and he's losing money, or why I'm outperforming him because I stick to our rules and eliminate any ego.He blamed his failure on not being able to get the recipe, and he didn't want to face reality.

Modesty is paramount
If you want to be a great trader, you have to overcome your ego and develop humility and prudence.Modesty can make you accept the fact that the future is unknown, it can make you give up trying to predict the future, it can prevent you from looking at failed transactions from a personal perspective, and it can also help you accept simple trading rules, because you Don't go looking for secrets that no one knows to prove that you are different.

Don't be arrogant
Although I'm a bit more laid-back than most (or even all) turtles, I don't want to present myself as some kind of robot with no ego, immune to human cognitive biases, and in complete control of my own mind.I can't do it either.I can give an example.

Sometime in the second year of the Turtle Plan we had a big move and I was once again full of the 4 position limit.I asked some of the other Turtles how many units they had and found that a few of them were not full, which meant they didn't quite take the opportunity.Therefore, when I ask them such a question, it really means which pot is not opened and which pot is to be lifted.

After get off work that day, I went to catch the commuter train as usual because I live in the western suburbs of Riverside, CA.A couple of turtles also took the train home, and we got off work around the same time.I remember, just as I opened the door and stepped into the car, I heard some turtle who had arrived a little earlier say to another, "Did you hear him? The pompous fool."

They are quite right.I'm a fool--the stupidest kind of fool, the most ignorant kind of fool.I never considered how my speech and behavior would affect other turtles.When I think about it a little bit, I know that it is cruel for them to brag about my achievements based on their mistakes.And I'm sure it's even more unbearable for these careless braggings coming from a brat high school graduate.

I have thought back on that day countless times over the past 20+ years.That was the day I vowed never to be a self-important fool again and to take a moment before every action to think about how my words and actions would affect other people.I've also started trying to be more tolerant of the egomaniacs I occasionally come across, because I've learned that I, too, can be a megalomaniac sometimes.

steadfast
Upholding this most important life motto is always easier said than done.Consistently sticking to your strategy is also the key to success in the world of trading.A systematic approach to trading, a deep understanding of its limitations, and the tools to build a trading system can help you become a more successful and determined trader.You have to be consistent, you have to be able to execute your plan, otherwise your plan is meaningless.

If you asked me to name the number one reason for the success of the Turtles, I would say that we learned from a legendary master trader is the most important reason.It is this which gives us confidence in Richard's method, and makes it easier to follow his laws steadfastly and consistently.Unless you can also find such a famous teacher who can give you the same confidence, you can only build this confidence yourself.You have to believe in your methods and in your ability to make money using them over a long period of time.

The best way I know of to build confidence in a systematic trading approach is to test the system with trading simulation software.Such software can help you see the past as if it were real history re-enacted.You will find that as you test various trading systems and test your assumptions against actual market data, you gain a lot of new insight.When you start actually trading, you will find that it is much more difficult than you imagined.Putting real money into the market is not the same as practicing or simulating.

If you are considering a career in trading, you must bear in mind one important fact: I am a very special person.For some odd biological and educational reasons, sticking to the rules is not so difficult for me.My psychological profile makes me vulnerable to cognitive biases.So, while I have seen how dangerous traders' mental blocks and weaknesses can be, I am not a good advisor if you need to overcome these types of issues because I have not encountered them myself.

Also, I am not an expert on trading psychology.So, although I can directly observe the importance of a healthy mind, I cannot tell you how to develop it.Fortunately, some other people have quite a research in this field.If your trading is not going as well as mine, they may be able to give you some special advice.Many have found the writings of Van Tharp, Brett Steenbarger, Ari Kiev, and Mark Douglas to be of great help to traders in mastering their inner demons.I suggest you read it too.

Finally, I want to emphasize that my trading method is based on trend following.I have also researched and experimented with other styles, including day trading and swing trading, so I know that the principles in this book apply to other styles as well.Don't assume that just because I'm focusing on trend following is the best way to do it.In fact, trend following is probably not a good fit for most people.Each style has specific requirements for your psychological profile, which you may or may not meet.It is very important to match the strengths and weaknesses of your personality with your trading style, and the authors mentioned above have more authoritative opinions on this issue.

Tips for Successful Turtle Trading

1. Take Advantage: Find a trading strategy with a positive expected value because it will generate positive returns in the long run.

2. Manage risk: Control risk and hold your ground, otherwise even if you have a system with positive expectations, you may not be able to wait for the day when it will produce results.

3. Unswerving: Only by unswervingly implementing your strategy can you truly obtain the positive expected value of the system.

4. Simple and clear: In the long run, simple systems are more viable than complex ones.

Remember, plans are meaningless if they cannot be executed.If you really want to be a successful trader, do number one first.That's what I did back then, and I've never regretted it.

(End of this chapter)