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Complete Turtle Trading System rules

That concludes the Complete Turtle Trading System rules. As you are probably thinking, they are not very complicated. But knowing these rules is not enough to make you rich. You have to be able to follow them.

Remember what Richard Dennis said: "I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn`t do is give them the confidence to stick to those rules even when things are going bad.” – From Market Wizards, by Jack D. Schwager. Perhaps the best evidence that this is true is the performance of the Turtles themselves; many of them did not make money. This was not because the rules didn`t work; it was

because they could not and did not follow the rules. By virtue of this same fact, few who read this document will be successful trading the Turtle Trading Rules. Again; this is not because the rules don`t work. It is because the reader simply won`t have the confidence to follow them.

The Turtle rules are very difficult to follow because they depend on capturing relatively infrequent large trends. As a result, many months can pass between winning periods; at times even a year or two. During these periods it is easy to come up with reasons to doubt the system, and to stop following the rules:

What if the rules don`t work anymore? What if the markets have changed?

What if there is something important missing from the rules?

How can I be really sure that this works?

One member of the first Turtles class, who was fired from the program before the end of the first year, suspected early on that information had been intentionally withheld from the group, and eventually became convinced that there were hidden secrets which Rich would not reveal. This particular trader could not face up to the simple fact that his poor performance was due to his own doubts and insecurities, which resulted in his inability to follow the rules.

Another problem is the tendency to want to change the rules. Many of the Turtles, in an effort to reduce the risk of trading the system, changed the rules in subtle ways which sometimes had the opposite of the desired effect.

An example: Failing to enter positions as quickly as the rules specify (1 unit every ½ N). While this may seem like a more conservative approach, the reality could be that, for the type of entry system the Turtles used, adding to positions slowly might increase the chance that a retracement would hit the exit stops—resulting in losses— whereas a faster approach might allow the position to weather the retracement without the stops being hit. This � subtle change could have a major impact on the profitability of the system during certain market conditions.

In order to build the level of confidence you will need to follow a trading system`s rules, whether it is the Turtle System, something similar, or a completely different system, it is imperative that you personally conduct research using historical trading data. It is not enough to hear from others that a system works; it is not enough to read the summary results from research conducted by others. You must do it yourself. Get your hands dirty and get directly involved in the research. Dig into the trades, look at the daily equity logs, get very familiar with the way the system trades, and with the extent and frequency of the losses.

It is much easier to weather an 8 month losing period if you know that there have been many periods of equivalent length in the last 20 years. It will be much easier to add to positions quickly if you know that adding quickly is a key part of the profitability of the system.

The Shep`s Trading Rule

"You can break the rules and get away with it. Eventually, the rules break you for not respecting them.From Zen in the Markets, by Edward A.Toppel