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Markets: What the Turtles Traded

The Turtles traded liquid futures that traded on U.S. exchanges in Chicago and New York.

T he Turtles were futures traders, at the time more popularly called commodities traders. We traded futures   contracts on the most popular U.S. commodities exchanges.

Since we were trading millions of dollars, we could not trade markets that only traded a few hundred contracts   per day because that would mean that the orders we generated would move the market so much that it would be   too difficult to enter and exit positions without taking large losses. The Turtles traded only the most liquid markets.

In general, the Turtles traded all liquid U.S. markets except the grains and the meats. Since Richard Dennis was   already trading the full position limits for his own account, he could not permit us to trade grains for him   without exceeding the exchange’s position limits.

We did not trade the meats because of a corruption problem with the floor traders in the meat pits. Some years   after the Turtles disbanded, the FBI conducted a major sting operation in the Chicago meat pits and indicted   many traders for price manipulation and other forms of corruption. The following is a list of the futures markets traded by the Turtles:

Chicago Board of Trade

30 Year U.S. Treasury Bond

10 Year U.S. Treasury Note

New York Coffee Cocoa and Sugar Exchange

Coffee

Cocoa

Sugar

Cotton

Chicago Mercantile Exchange

Swiss Franc

Deutschmark

British Pound

French Franc

Japanese Yen

Canadian Dollar

S&P 500 Stock Index

Eurodollar

90 Day U.S. Treasury Bill Comex

Gold

Silver

Copper New York Mercantile Exchange

Crude Oil

Heating Oil

Unleaded Gas

The Turtles were given the discretion of not trading any of the commodities on the list. However, if a trader   chose not to trade a particular market, then he was not to trade that market at all. We were not supposed to trade markets inconsistently.

Liquidity

The primary criterion used to determine the futures that could be traded by the Turtles was the liquidity of the underlying markets.

Position Sizing

The Turtles used a volatility-based constant percentage risk position sizing algorithm.

P osition sizing is one of the most important but least understood components of any trading system.

The Turtles used a position sizing algorithm that was very advanced for its day, because it normalized the dollar   volatility of a position by adjusting the position size based on the dollar volatility of the market. This meant that   a given position would tend to move up or down in a given day about the same amount in dollar terms (when

compared to positions in other markets), irrespective of the underlying volatility of the particular market.

This is true because positions in markets that moved up and down a large amount per contract would have an offsetting smaller number of contracts than positions in markets that had lower volatility.

This volatility normalization is very important because it means that different trades in different markets tend to   have the same chance for a particular dollar loss or a particular dollar gain. This increased the effectiveness of   the diversification of trading across many markets.

Even if the volatility of a given market was lower, any significant trend would result in a sizeable win because the   Turtles would have held more contracts of that lower volatility commodity.