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Tactics

Miscellaneous guidelines to cover the rest of trading the Turtle System Rules.

T he famous architect Mies van der Rohe, when speaking about restraint in design, once said: “God is in the   details.” This is also true of trading systems. There are some important details which remain that can make a   significant difference in the profitability of your trading when using the Turtle Trading Rules.

Entering Orders

As has been mentioned before, Richard Dennis and William Eckhardt advised the   Turtles not to use stops   when placing orders. We were advised to watch the market and enter orders when the price hit our stop price.

We were also told that, in general, it was better to place limit orders instead of market orders. This is because   limit orders offer a chance for better fills and less slippage than do market orders.

Any market has at all times a bid and an ask. The bid is the price that buyers are willing to buy at, and the ask is   the price that sellers are willing to sell at. If at any time the bid price becomes higher than the ask price, trading   takes place. A market order will always fill at the bid or ask when there is sufficient volume, and sometimes at a   worse price for larger orders.

Typically, there is a certain amount of relatively random price movement that occurs, which is sometimes known   as the bounce. The idea behind using limit orders is to place your order at the lower end of the bounce, instead   of simply placing a market order. A limit order will not move the market if it is a small order, and it will almost

always move it less if it is a larger order.

It takes some skill to be able to determine the best price for a limit order, but with practice, you should be able   to get better fills using limit orders placed near the market than with market orders.

Fast Markets

At times, the market moves very quickly through the order prices, and if you place a limit order it simply won`t   get filled. During fast market conditions, a market can move thousands of dollars per contract in just a few minutes.

During these times, the Turtles were advised not to panic, and to wait for the market to trade and stabilize before placing their orders.

Most beginning traders find this hard to do. They panic and place market orders. Invariably they do this at the   worst possible time, and frequently end up trading on the high or low of the day, at the worst possible price.

In a fast market, liquidity temporarily dries up. In the case of a rising fast market, sellers stop selling and hold out   for a higher price, and they will not re-commence selling until after the price stops moving up. In this scenario,   the asks rise considerably, and the spread between bid and ask widens.

Buyers are now forced to pay much higher prices as sellers continue raising their asks, and the price eventually   moves so far and so fast that new sellers come into the market, causing the price to stabilize, and often to   quickly reverse and collapse partway back. Market orders placed into a fast market usually end up getting filled at   the highest price of the run-up, right at the point where the market begins to stabilize as new sellers come in.

As Turtles, we waited until some indication of at least a temporary price reversal before placing our orders, and   this often resulted in much better fills than would have been achieved with a market order. If the market   stabilized at a point which was past our stop price, then we would get out of the market, but we would do so   without panicking.

Simultaneous Entry Signals

Many days as traders there was little market movement, and little for us to do besides monitor existing positions.   We might go for days without placing a single order. Other days would be moderately busy, with signals   occurring intermittently over the stretch of a few hours. In that case, we would simply take the trades as they   came, until they reached the position limits for those markets.

Then there were days when it seemed like everything was happening at once, and we would go from no   positions, to loaded, in a day or two. Often, this frantic pace was intensified by multiple signals in correlated markets.

This was especially true when the markets gapped open through the entry signals. You might have a gap opening   entry signal in Crude Oil, Heating Oil and Unleaded Gas all on the same day. With futures contracts, it was also   extremely common for many different months of the same market to signal at the same time.