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Buy Strength – Sell Weakness

If the signals came all at once, we always bought the strongest markets and sold short the weakest markets in a group.

We would also only enter one unit in a single market at the same time. For instance, instead of buying February,   March and April Heating Oil at the same time, we would pick the one contract month that was the strongest,   and that had sufficient volume and liquidity.

This is very important! Within a correlated group, the best long positions are the strongest markets (which   almost always outperform the weaker markets in the same group). Conversely, the biggest winning trades to the   short side come from the weakest markets within a correlated group.

As Turtles, we used various measures to determine strength and weakness. The simplest and most common way   was to simply look at the charts and figure out which one "looked” stronger (or weaker) by visual examination.

Some would determine how many N the price had advanced since the breakout, and buy the market that had moved the most (in terms of N).

Others would subtract the price 3 months ago from the current price and then divide by the current N to   normalize across markets. The strongest markets had the highest values; the weakest markets the lowest.

Any of these approaches work well. The important thing is to have long positions in the strongest markets and   short positions in the weakest markets.

Rolling Over Expiring Contracts

When futures contracts expire, there are two major factors that need to be considered before rolling over into a new contract.

First, there are many instances when the near months trend well, but the more distant contracts fail to display   the same level of price movement. So don`t roll into a new contract unless its price action would have resulted in an existing position.

Second, contracts should be rolled before the volume and open interest in the expiring contract decline too   much. How much is too much depends on the unit size. As a general rule, the Turtles rolled existing positions   into the new contract month a few weeks before expiration, unless the (currently held) near month was   performing significantly better than farther out contract months.