Precisely, the black arrows represent the highs and lows in a look back of 20 days. This is the typical Turtle strategy. The Turtle strategy using the Donchian channel is simple. When the market breaks above the resistance line, we can prepare to go long. Similarly, when the market goes below the support line, we can go short. Consider the below figure. Reading from the left, we can see that the market was holding at the upper line of the channel.
Later, a huge green candle broke above the channel. Many would hit a buy at this moment, but we wait for a confirmation. When another candle shows a bullish sentiment as well, we can hit the buy at the point shown on the chart.
However, to keep it simple, you can keep the stop loss a few pips below the candle, which broke the channel. In the above example, we saw the typical way of trading the Turtle strategy. In this set of examples, we shall reverse the logic.
That is, we will look to go long when the price breaks below the channel and short when the price breaks above the channel. Later, the price comes down to that low and even tries to break below it. Once the price shoots right back up to the line, we anticipate on the buy. The sell strategy is just the opposite of the strategy discussed for a buy. When a 20 day high is challenged for the second time having a gap of at least four days from the previous low, we can look to go short.
Starting from the left, we can see that the market came down and made a 20 day low indicated by the black dotted line. Now that we have the first low, we wait for the price to down to that low in more than four candles days.
And when the price spikes below the prior low and comes back up, we can hit the buy at the encircled region. As far as the stop loss and take profit is concerned, we can keep a stop loss pips below the low of the present candle and aim for a good RR on this trade.
In the below chart, the market made a 20 day high up to the black dotted line. Later, the price goes above the previous 20 days high yet again. Here, the price holds above the line and then drops below the next candle. Dennis recruited 23 people from all sorts of different backgrounds and started a training program to help see how each would perform after some training.
In their training, each recruit was given a set of trading rules to follow, but in the end, it was entirely up to them how they would trade. They had almost ZERO prior trading experience yet most, if not all of them were able to make big cash during their run with Richard and Dennis. They essentially learned from trial and error, and from experience. So always remember to train well, young padawan. It is nurture, not nature that is more important in shaping the trader mindset. Covel, bestselling author of Trend Following and managing editor of TurtleTrader.
He describes how Dennis interviewed and selected his students, details their education and experiences while working for him, and breaks down the Turtle system and rules in full. He reveals how they made astounding fortunes and follows their lives from the original experiment to the present day. I'm trying as hard as I can, and sometimes things don't go your way, and that's the way things go. Tiger Woods.
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By the early s, Dennis was widely recognized in the trading world as an overwhelming success. He and his partner, Eckhardt, had frequent discussions about their success. Dennis believed anyone could be taught to trade the futures markets , while Eckhardt countered that Dennis had a special gift that allowed him to profit from trading.
The experiment was set up by Dennis to finally settle this debate. Dennis would find a group of people to teach his rules to, and then have them trade with real money. Dennis believed so strongly in his ideas that he would actually give the traders his own money to trade. The training would last for two weeks and could be repeated over and over. He called his students " turtles " after recalling turtle farms he had visited in Singapore and deciding that he could grow traders as quickly and efficiently as farm-grown turtles.
To settle the bet, Dennis placed an ad in The Wall Street Journal, and thousands applied to learn trading at the feet of widely acknowledged masters in the world of commodity trading. Only 14 traders would make it through the first "Turtle" program. No one knows the exact criteria Dennis used, but the process included a series of true-or-false questions, a few of which you can find below:.
For the record, according to the Turtle method, 1 and 3 are false; 2, 4, and 5 are true. Turtles were taught very specifically how to implement a trend-following strategy. The idea is that the "trend is your friend," so you should buy futures breaking out to the upside of trading ranges and sell short downside breakouts. In practice, this means, for example, buying new four-week highs as an entry signal.
Figure 1 shows a typical turtle trading strategy. Figure 1: Buying silver using a day breakout led to a highly profitable trade in November Source: Genesis Trade Navigator. This trade was initiated on a new day high. The exit signal was a close below the day low. The exact parameters used by Dennis were kept secret for many years, and are now protected by various copyrights.
Dennis had proved beyond a doubt that beginners can learn to trade successfully. Even without Dennis' help, individuals can apply the basic rules of turtle trading to their own trading. The general idea is to buy breakouts and close the trade when prices start consolidating or reverse. Short trades must be made according to the same principles under this system because a market experiences both uptrends and downtrends. While any time frame can be used for the entry signal, the exit signal needs to be significantly shorter in order to maximize profitable trades.
Despite its great successes, however, the downside to turtle trading is at least as great as the upside. Drawdowns should be expected with any trading system, but they tend to be especially deep with trend-following strategies. This is at least partly due to the fact that most breakouts tend to be false moves, resulting in a large number of losing trades. The story of how a group of non-traders learned to trade for big profits is one of the great stock market legends.
It's also a great lesson in how sticking to a specific set of proven criteria can help traders realize greater returns. In this case, however, the results are close to flipping a coin, so it's up to you to decide if this strategy is for you. Technical Analysis Basic Education. Podcast Episodes. Therefore, Turtle Soup is a classic version of a testing system - a trading system, where the probability of losses is higher than the profit, nevertheless, it still brings revenue.
As for the exit from the position, Linda Raschke recommends a time approach the position is closed bars after the entry or using a floating stop order. Given the variety of modern techniques, you can use divisible R , a break from diagonal support, or other approaches. The position can be entered not only during the formation of the bar number 1, but also at the next bar.
In the example below with the Australian dollar, the position is closed, provided that the target is reached in one of the harmonious trade patterns. The author of Top Trading Performance is not the only trader using the Anti-Turtles pattern in their trading.
It was used by such celebrities as Larry Williams and Victor Sperandeo. This and other features of the pattern will be discussed in subsequent materials. Home Blog Beginners Turtle soup: trading against the crowd. Rate this article:. Need to ask the author a question? Please, use the Comments section below. Start Trading Cannot read us every day? Get the most popular posts to your email. Full name. Written by. Dmitri Demidenko Independent analyst. How central banks affect the exchange rates.
Getting into the heads of regulators is what it takes to effectively forecast the exchange rates. Features of peak trading according to the popular pattern. Follow us in social networks!
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A catch saying “the trend is your friend” is a motto of the Turtle strategy. The concept is simple, and Turtle trader rules made the process. The turtles were taught how to implement a trend-following strategy. It's a type of trading strategy where you attempt to ride the momentum of an asset, whether. Successful traders are made, not born. Nothing can prove this concept more than the story of the Turtle Traders.