The turtle strategy is famous for having allowed a group of traders to make substantial profits without having previous trading knowledge. In this article, we will of course be interested in this strategy, but the main thing to remember is that it is necessary to have a defined system to which to refer when trading. Obviously, not all are created equal!
The turtle strategy: the principle
Richard Dennis’ bet seems crazy: to transform complete novices into winning traders. And yet, we can say that it was a success! Even if this experience is somewhat dated (1983), the conclusions drawn from it are still valid.
The parameters of the turtle strategy
Assets dealt with: currencies, commodities and government bonds. Diversification is important in this strategy and took into account the correlations between the different currencies / assets.
Size of positions: depending on the volatility of the asset. In addition, the amount used to trade was reduced when losses were recorded by the trader. Go for Changelly and find now the solutions for you.
Exactly the opposite of what most traders do! Often when we register losses on an asset, the first reflex is to persist in its error and to buy / sell new lots in order to “level” its expected gains. We therefore persist in a direction which is, most of the time, wrong. All this is to avoid hitting our little ego.
Market entry signals: the breakout method was applied over a period of 20 or 55 days. It simply means that the orders were placed in the breakout direction (so it is directional trading) when a 20 or 55 day high / low was reached. It is very simple, therefore. Why don’t we do it? Because these breakout signals would be very rare, and most (losing) traders in forex are looking for as many trading opportunities as possible!
Exit signals: stops were mandatory! As a fervent activist for stops, I love this strategy just for this rule. The levels of stops depended on the volatility but were always determined so that the maximum loss generated by a trade does not exceed 2% of the capital. So much for the losing trades. If the trade developed favorably, the patience of the young turtles was still put to the test (suddenly, they had well deserved their name!) Since the exits were done on the highest / lowest at 10 days (for the entries on breakouts 20 periods) or 20 days (for breakouts 55 periods).