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A Complete Trading System

The Turtle Trading System was a Complete Trading System, one that covered every aspect of   trading, and left virtually no decision to the subjective whims of the trader.

M ost successful traders use a mechanical trading system. This is no coincidence. A good mechanical trading   system automates the entire process of trading. The system provides answers for each of the decisions a trader   must make while trading. The system makes it easier for a trader to trade consistently because there is a set of   rules which specifically define exactly what should be done. The mechanics of trading are not left up to the judgment of the trader.

If you know that your system makes money over the long run, it is easier to take the signals and trade according   to the system during periods of losses. If you are relying on your own judgment during trading, you may find   that you are fearful just when you should be bold, and courageous when you should be cautious.

If you have a mechanical trading system that works, and you follow it consistently, your trading will be   consistent despite the inner emotional struggles that might come from a long series of losses, or a large profit.   The confidence, consistency, and discipline afforded by a thoroughly tested mechanical system are the key to   many of the most profitable traders` success.

The Turtle Trading System was a Complete Trading System. Its rules covered every aspect of trading, and left no   decisions to the subjective whims of the trader. It had every component of a Complete Trading System.

The Components of a Complete System

A Complete Trading System covers each of the decisions required for successful trading:

Markets - What to buy or sell

Position Sizing - How much to buy or sell

Entries - When to buy or sell

Stops - When to get out of a losing position

Exits - When to get out of a winning position

Tactics - How to buy or sell

Markets – What to buy or sell

The first decision is what to buy and sell, or essentially, what markets to trade. If you trade too few markets you   greatly reduce your chances of getting aboard a trend. At the same time, you don`t want to trade markets that   have too low a trading volume, or that don`t trend well.

Position Sizing – How much to buy or sell

The decision about how much to buy or sell is absolutely fundamental, and yet is often glossed over or handled improperly by most traders.

How much to buy or sell affects both diversification and money management. Diversification is an attempt to   spread risk across many instruments, and to increase the opportunity for profit by increasing the opportunities   for catching successful trades. Proper diversification requires making similar, if not identical bets on many   different instruments. Money management is really about controlling risk by not betting so much that you run   out of money before the good trends come. How much to buy or sell is the single most important aspect of   trading. Most beginning traders risk far too much on each trade, and greatly increase their chances of going bust, even if they have an otherwise valid trading style.

Entries – When to buy or sell

The decision of when to buy or sell is often called the entry decision. Automated systems generate entry signals   which define the exact price and market conditions to enter the market, whether by buying or selling.

Stops – When to get out of a losing position

Traders who do not cut their losses will not be successful in the long term. The most important thing about   cutting your losses is to predefine the point where you will get out before you enter a position.

Exits – When to get out of a winning position

Many "trading systems” that are sold as complete trading systems do not specifically address the exit of winning   positions. Yet the question of when to get out of a winning position is crucial to the profitability of the system.   Any trading system that does not address the exit of winning positions is not a Complete Trading System.

Tactics – How to buy or sell

Once a signal has been generated, tactical considerations regarding the mechanics of execution become   important. This is especially true for larger accounts, where the entry and exit of positions can result in   significant adverse price movement, or market impact.

Summary

Using a mechanical system is the best way to consistently make money trading. If you know that your system   makes money over the long run, it is easier to take the signals and follow the system during periods of losses. If   you rely on your own judgment, during trading you may find that you are fearful just when you should be   courageous, or courageous when you should be fearful.

If you have a profitable mechanical trading system, and you follow it religiously, then your trading will be   profitable, and the system will help you survive the emotional struggles that inevitably result from a long series   of losses, or large profits. The trading system that was used by the Turtles was a Complete Trading System. This   was a major factor in our success. Our system made it easier to trade consistently, and successfully, because it did not leave important decisions to the discretion of the trader.