Turtle trading rules

What it is

In 1983 and 1984 Richard Dennis and William Eckhardt trained a group of novices, the 'Turtles', to see whether trading could be taught. The rules were fully mechanical. System 1 bought a 20-day high and sold a 20-day low, but skipped the signal if the previous one would have been a winner. System 2 used 55-day breakouts. Exits were opposite breakouts of 10 or 20 days.

Risk was set by volatility: N is the 20-day average true range. The stop was 2N from entry. A unit was sized so that a 1N move equalled 1% of the account, and up to four units could be added, every half-N in the trade's favour.

Turtle Soup, the Connors and Raschke reversal setup, was named after these traders because it fades their breakouts.

How to spot it

• A close above the highest high of the last 20 or 55 days (the Donchian channel).
• N: the 20-day ATR.

How to use it

• Mostly a lesson in sizing and following rules; the breakout edge has weakened since the 1980s.
• Its volatility-based sizing works with any strategy.

Common mistakes

• Copying the entries but not the sizing and exits, which were the point.
• Expecting a high win rate; trend following wins rarely and big.

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