How to Be Successful in Trading Like the Turtle Traders
The popular statistics in trading thrown in the retail world of forex says that 95% of traders do not succeed. With this high rate, you would think that to be a good trader, it must run in the blood!
In reality, no good trader was born that way. They were made. To prove this concept, you must know the Turtle Traders story.
What is it? Turtle trading is a well-known strategy used in forex trading wherein the traders take advantage of constant momentum. It finds breaks to both downside and upside, and is utilized in the multitude of financial markets.
In the year 1983, two traders named Bill Eckhardt and Richard Dennis got into a heated discussion whether a good trader is out of genes or if it is learned.
Bill Eckhardt is confident that excellent trading skills could not be taught and comes from within. On the other hand, Richard Dennis reasoned that through proper education about forex, anybody can become a good trader.
Their debate got so heated up that they made a decision to put their claims to an experiment. Dennis has enlisted 23 people from different upbringings and began a training program to then see if they would improve their performance after training. Each recruit was presented rules to follow, but eventually, it is up to them how they are going to trade.
Dennis gave each of his recruits, which he called The Turtles, $1 million to start with. In a matter of 4 years, his group accumulated over $100 million as a whole. The most successful among them during that test when he started the training program was only nineteen.
Thus, the experiment proved that you do not need the genes of a trader to be good at it. Anyone can be successful in this career with the right attitude and tools.
The Rules of Turtle Trading
The turtles look for high liquidity markets that will let them trade without the market moving with no large order, so they trade futures contracts. They trade FX, commodities, metals, bonds, metals and S&P 500.
What the turtles used are position-sizing algorithms which standardized the position volatility of dollars by changing the trade size based on the market’s dollar volatility. To measure the market’s volatility, the structure viewed at 20 days exponential progressing means the true limit.
There are 2 systems used in the turtle trading. The first is the simple 20-day breakout termed as 20-day high or low, and the other is a 55-days breakout. Winning positions can be augmented to up to four entries in maximum. The turtles are advised to make sure that all signals offered are taken since losing or disregarding a signal can lead to miss out on bigger winner which will drag down their overall profits.
This rule requires the turtles to make use of stop losses all the time. It is for them to guarantee that there will be no more large losses. They significantly identify their stop losses before entering the position, determining the risk before placing the trade. More unstable markets have broader stops to prevent them from being wiped out of a trade.
The common mistake in forex trading is getting out of position too early. This can limit the probable win on the trade. The systems that turtles were taught includes taking lots of trades which a few turned to big winners and others were small losses. Turtle traders didn’t stop exit orders, rather they watch in real time how the price moves.
Lastly, they learned some tactics on using limit orders and in dealing with markets that are fast-moving, which includes waiting calmly before placing orders, than rushing like what the newbies usually do. they were taught to sell the weakest markets and buy the strongest, for them to take advantage of the momentum.
The turtle trader’s story is very encouraging especially whenever you feel that you’re not born for trading. Remember, this team had almost no prior knowledge and experience but they were able to succeed.
They succeeded because they were trained and they learned through experience, not because of the genes.