The year is 1983, and two trading partners, later to be the world’s renowned trading legends, find themselves with contrasting beliefs. Richard Dennis held that trading could be learned, that anyone could be taught to trade the markets, while William Eckhardt strongly believed that trading was an inborn skill, and that successful traders are born with a special talent. Richard Dennis set out to prove to his friend and trading partner, William Eckhart that indeed, anyone can be taught how to trade by following a well-laid-out trading system and approach.
To settle the debate between them, Dennis decided to experiment by recruiting and training some novice traders to ascertain the possibility of turning them into successful traders. He called it ‘the Turtle experiment’. They placed an advertisement and received applicants from random aspirants to be trained.
Fourteen successful applicants were picked and trained for two weeks. During the training, Dennis referred to his students as Turtles as a reminder of the turtle farms he had visited in Singapore and decided that he could grow traders as quickly and efficiently as farm-grown turtles.
Over the following weeks, Richard Dennis taught the new traders who didn’t have prior trading knowledge, a technical system and approach to trading the markets. The trading system was quantifiable and followed a strict risk management plan.
After the training, Dennis believed strongly that they would become successful traders if only they adhered strictly to the rules outlined in the system (trading plan). He funded their trading accounts with amounts ranging from $500,000 to $ 2,000,000. In the end, many of those traders were successful, and some of them ended up starting their own hedge funds and are some of the greatest performers in the industry today.
Jerry Parker has made the most money as a Turtle. His achievement as arguably the best and most profitable student of Richard Dennis is unquestioned. Some “others” might call themselves the most successful Turtles, but Jerry Parker’s track record proves them incorrect.
So in the end, Dennis was proven right that trading skills can be learned.
This real-life experiment is what inspired a previous article we covered on why you must learn an online skill today, because anyone can learn trading if taught & mentored to follow a proven trading system.
In today’s article, we have covered the four main strategies and disciplines upon which the Turtle traders we trained, that have led to their immense success to date.
- Rule-based Approach
According to Dennis, it’s one thing to understand a strategy and a totally different thing to implement it consistently with discipline. The turtle traders we taught how to use and follow strict trading rules that governed every action they performed in the markets. Adopting a proven mechanical system is the only way traders can beat the markets and achieve consistent results in their careers.
II. Trend Trading & Volatility-based position sizing
The original turtle trading strategy was mainly a trend-following strategy. The turtles were tasked to analyze and pick trades only on markets that were volatile with a clearly formed trend. Following a strong trend enabled them to position their trades so that they risked a small amount and targeted to follow the trend until its exhaustion, thereby targeting big rewards. They were not allowed to pick any trades that did not offer them a reward at least twice or thrice the risk amount.
III. Pyramiding – The Turtles Added to Winners
Pyramiding is a technique we teach in our comprehensive online course (add link), whereby a trader maximizes profits on their winning trades. It is a systematic approach where, after a winning trade surpasses a certain level of profits, you add more positions to the trade, while at the same time locking in the profits that your trade has already achieved. This way, a trader is able to use the profit they locked in as leverage to add to their current position, thereby maximizing returns from the current winning trade. A strategy called pyramiding.
This is how the turtle traders maximized on their winning trades to achieve exemplary results in the long-term, a technique that we cover extensively in our online course.
IV. The Turtle Trading Exits & Stops
The turtles had strict rules for stop-loss orders and exits. They were taught and expected to determine ahead of time when to cut losses and move on. They had pre-determined price levels to exit trades when the markets reached them.
Looking at their approach from a general outlook, the turtle traders followed price action and market structure, all encapsulated in a rule-based trading system, which ensured they cut their losses short and maximized on their winning positions by applying the pyramiding technique. They only traded when they had an edge, i.e., positive expectancy from the particular markets that they traded. You see, the markets have not changed, and will never change. This is simply because human nature never changes. Patterns that have happened before in the markets repeat themselves, over and over, and this is our edge: to master them and trade them to make good returns.
This is what our price action & market structure course teaches our traders, and continues to mentor hundreds of successful traders across the whole of Africa.
