The Original Turtle Trading Rules
Fighting the scams, frauds and charlatansThe OriginalTurtle Trading Rules
ORIGINALTURTLES.ORGThe Original Turtle Trading Rules 2003 OrignalTurtles.org
Table of ContentsF OR E W ORDExamples15The Importance of Position Sizing16Units as a measure of Risk16Free Rules? Are you kidding?1The Origin of the Free Rules Project1The Ugly Truth about the System Sellers2C HAP T ERRules You Won’t Follow Don’t Matter3Entries19The Genesis of the Project4Breakouts19Adding Units20Consistency21I NT R ODUC T I ONThe Turtle Experiment6C HAP T ERC HAP T ER415Stops22A Complete Trading System8Turtle Stops22The Components of a Complete System9Stop Placement23Markets9Alternate Stop Strategy – The Whipsaw24Position Sizing9Benefits of the Turtle System Stops24Entries9Stops10C HAP T ERExits10Exits26Tactics10Turtle Exits27Summary10These are Difficult Exits27C HAP T ER2MarketsC HAP T ERC HAP T ER11367Tactics28Entering Orders28Fast Markets29Position Sizing13Simultaneous Entry Signals29Volatility – The Meaning of N13Finally31Dollar Volatility Adjustment14Units15
C HAP T ER8Further Study33Trading Psychology33Money Management34Trading Research34
ORIGINAL TURTLESForewordfFree Rules?Are you kidding?Why are some of the Original Turtles giving away Rules for whichothers have charged thousands of dollars? Are these the actualOriginal Turtle Trading System rules?You probably asked yourself the same questions: “Why would anyone giveaway the rules to the original Turtle Trading System? How can I be sure thatthese are the original Turtle Trading System rules as taught by Richard Dennisand William Eckhardt?” The answer to these questions lies in the origin ofthis project.The Origin of the Free Rules ProjectThis project had its seed in various discussions among a few of the original Turtles,Richard Dennis, and others regarding the sale of the TurtleRichard Dennis andTrading System rules by a former turtle, and subsequently, on aWilliam Eckhardtwebsite by a non-trader. It culminated in this document, whichwere not consulted prior tothe marketing of the Turtlediscloses the Original Turtle Trading Rules in their entirety, freeTrading Rules and did notof charge.benefit in any way from thesale of the Turtle Rules theydeveloped.Why? Because many of us believed that we owed an obligationto Richard Dennis not to reveal the rules, even after our contractual 10 year secrecypact ended in late 1993. For this reason, we did not look kindly upon the sale of thoserules by a former turtle.Further, we saw the sale on the web site as crass and opportunistic intellectual propertytheft, an act that, while technically not illegal, was certainly not honorable.At the same time, having seen others try to follow these rules first-hand, I realized itwas unlikely that their publication would result in very many people actually learning to1
ORIGINAL TURTLEStrade like the Turtles. In fact, I knew that most of those who spent thousands to learnthese heretofore secret rules would end up disappointed, for three reasons:xxxThe rules wouldn’t be clear, since the people selling them didn’t know how totrade.Even if they were clearly presented, the buyers probably wouldn’t be able tofollow the rules.Most of the Turtles are now trading even better rules.The Ugly Truth about the System SellersI’ve been trading and hanging around trading circles since high school. One of the sadrealities of the trading industry, and the futures trading industry in particular, is thatthere are far more people making money selling others’ systems and “ways to makemoney trading,” than there are people actually making money trading.I won’t go into specifics here, but those of us who actually trade for a living know thenames of many “famous traders” who are famous as “traders,” but that don’t makemoney as traders. They make money selling new trading systems, seminars, homestudy courses, etc. Most of these so called “experts” can’t trade and don’t trade thesystems that they sell.Yes, this is also true of those selling the Turtle Trading Rules. Consider the majorsellers: the first, a web site, TurtleTrader.com, and the second, a former turtle. Here’swhat they won’t tell you:TurtleTrader.com - A web site run mainly by one guy (an admittedly talented webmarketer that also has a pharmacy site and a site that sells personality tests),turtletrader.com purports to have the actual Turtle Trading Rules, and will sell them toyou for 999.00. The site is filled with huge amounts of information about trading, andbills itself as the “No. 1 Source for Trend Following Worldwide.”What they don’t tell you is that the site is run by a guy who doesn’t even trade his ownrules—or trade at all for that matter—and has never been a successful trader. Yet hepurports to be an expert on the “Turtle Trading Rules,” and on trend following!You can get something close to the actual rules from this site, but you won’t get anyexpert advice from the guy who runs it. All you will get is the regurgitation of advicefrom other traders that is not tempered by the experience of a successful trading career.Paying for advice from this source is a lot like hiring a blind guide.In the final analysis, TurtleTrader.com is not any better than other scams and systemselling hucksters he warns about. It is a site run by a guy who appears to me to be more2
ORIGINAL TURTLESinterested in taking his customers’ money than he is in their success with the system hesells; a site run by someone who misrepresents himself as an expert in trend following,yet doesn’t mention that he doesn’t trade.The money-back guarantee is almost worthless; you have to keep a log of all yourtrades and prove that you made them in the markets by providing your brokeragestatements. If you don’t like the rules and want your money back, it seems exceedinglyunlikely that you would open a trading account and then trade for a year just to get therefund.Former Turtle - This individual, a former turtle, sells tapes, books, hotlines, videos,seminars, and more, for prices ranging from 29.95 to 2,500.What the Former Turtle won’t tell you is that he never made money as a turtle; in facthe didn’t last a full year as a turtle before he was fired from the turtle program becausehe couldn’t trade the Turtle System Rules successfully. He lost money while most ofthe other traders were making a lot of money.The Former Turtle lends credence to the oft quoted maxim: “Those that can do, thosethat can’t teach.”I haven’t seen the seminar or read the books, but I can’t imagine how someone whocouldn’t make money after having been taught directly by Richard Dennis can explainto others how to trade using the Turtle Trading Rules.Rules You Won’t Follow Don’t MatterWhat TurtleTrader.com and the Former Turtle don't tell you is that trading rules areonly a small part of successful trading. The most importantFollowing Rulesaspects of successful trading are confidence, consistency, andAs famous trader and fatherof the Turtles, Richarddiscipline.Dennis said: “I always saythat you could publish mytrading rules in thenewspaper and no onewould follow them. The keyis consistency and discipline.Almost anybody can makeup a list of rules that are80% as good as what wetaught our people. Whatthey couldn’t do is give themthe confidence to stick tothose rules even when thingsare going bad.” – fromMarket Wizards, by Jack D.Schwager.Rules that you can’t or won’t follow will not do you any good.The Turtles had a lot of reasons to be confident in the rules theywere given. For the most part, we had the confidence to followthem even during losing periods. Those who didn’t consistentlyfollow the rules didn’t make money and were dropped from theprogram.Traders who want to be successful will figure out a way to gainenough confidence in their own rules of trading to be able toapply them consistently.3
As original Turtles, we had it easy. We were given rules by some of the world’s mostsuccessful and famous traders, Richard Dennis and his trading partner Bill Eckhardt.They taught us the rules and the reasons why we could trust those rules. Then we wereplaced into an open office with ten other traders who had been taught those samerules. In some respects it was easier to follow the rules than to not follow the rules.On the whole, we had the confidence and the discipline to consistently apply the ruleswe were given. This was the secret of our success as traders.Those who failed to follow the rules invariably failed as Turtles. Some of them decidedthey could make more money selling the Turtle rules than they did as Turtles.The Genesis of the ProjectLike many of the other Turtles, it always bothered me that some were making moneyoff the work of Richard Dennis and Bill Eckhardt without their consent; that thesesecret-sellers had used the success of the Turtles to dupe others into spendingthousands of dollars on products that were not what they appeared.I had often thought that a great way to deal with this problem would be to give theTurtle Trading Rules away for free. Since others had already let the cat out of the bag,and since anyone who really wanted the rules could already get them by paying, itwouldn’t violate my sense of fair play to reveal them.When a friend and fellow trader, Arthur Maddock, told me about his ideas for a newsite to support traders that were interested in learning more about system trading (theTurtle Trading Rules being one of the most famous examples thereof), I suggested thathe could differentiate his new site by giving away the rules to the Turtle TradingSystem. Therefore, we decided it would be better to form a completely new site withno commercial ties.Arthur shares my interest in developing the trading industry to move it away from thesnake-oil and magical elixir stage in which it remains. For that reason, it seemed likepoetic justice that giving the rules away and revealing the truth about those who hadbeen selling them would probably end the practice of selling the Turtle Trading Rulesas a way to make money.So that is what we have done.with a slight twist.4
While the rules are free, we respectfully ask that those who gain benefit from the rulesand find them valuable send a donation supporting a charity in honor of RichardDennis, Bill Eckhardt and the original Turtles. You can find a copy of the charitiesfavored by the Turtles on the new web site: originalturtles.org.Curtis Faith, an Original Turtle5
ORIGINAL TURTLESIntroductioniThe Turtle ExperimentRichard Dennis wanted to find out whether great traders are bornor made.The age old question: Nature or nurture?In mid-1983, famous commodities speculator Richard Dennis was having anongoing dispute with his long-time friend Bill Eckhardt about whether greattraders were born or made. Richard believed that he could teach people to becomegreat traders. Bill thought that genetics and aptitude were the determining factors.In order to settle the matter, Richard suggested that they recruit and train some traders,and give them actual accounts to trade to see which one of them was correct.They took out a large ad advertising positions for trading apprentices in Barron’s, theWall Street Journal and the New York Times. The ad stated thatTrading wasafter a brief training session, the trainees would be supplied withTeachablean account to trade."Trading was even moreteachable than I imagined,"he says. "In a strange sort ofway, it was almosthumbling." – RichardDennis, Wall Street Journal.Since Rich was probably the most famous trader in the world atthe time, he received submissions from over 1000 applicants. Ofthese, he interviewed 80.This group was culled to 10, which became 13 after Rich added three people he alreadyknew to the list. We were invited to Chicago and trained for two weeks at the end ofDecember, 1983, and began trading small accounts at the beginning of January. Afterwe proved ourselves, Dennis funded most of us with 500,000 to 2,000,000 accountsat the start of February.“The students were called the ‘Turtles.’ (Mr. Dennis, who says he had just returnedfrom Asia when he started the program, explains that he described it to someone bysaying, ‘We are going to grow traders just like they grow turtles in Singapore.’)” –Stanley W. Angrist, Wall Street Journal 09/05/19896
ORIGINAL TURTLESThe Turtles became the most famous experiment in trading history because over thenext four years, we earned an average annual compound rate of return of 80%.Yes, Rich proved that trading could be taught. He proved that with a simple set ofrules, he could take people with little or no trading experience and make them excellenttraders.Continue reading. The complete set of the rules that Richard Dennis taught his traineesfollows, starting with the next chapter.7
ORIGINAL TURTLESChapter1A CompleteTrading SystemThe Turtle Trading System was a Complete Trading System, onethat covered every aspect of trading, and left virtually no decision tothe subjective whims of the trader.Most successful traders use a mechanical trading system. This is nocoincidence.A good mechanical trading system automates the entire process of trading.The system provides answers for each of the decisions a trader must make whiletrading. The system makes it easier for a trader to trade consistently because there is aset of rules which specifically define exactly what should be done. The mechanics oftrading are not left up to the judgment of the trader.If you know that your system makes money over the long run, it is easier to take thesignals and trade according to the system during periods of losses. If you are relying onyour own judgment during trading, you may find that you are fearful just when youshould be bold, and courageous when you should be cautious.If you have a mechanical trading system that works, and you follow it consistently,your trading will be consistent despite the inner emotional struggles that might comefrom a long series of losses, or a large profit. The confidence, consistency,
1 Units as a measure of Risk 16 The Origin of the Free Rules Project 1 The Ugly Truth about the System Sellers 2 C H A P T E R 4 Rules You Won’t Follow Don’t Matter 3 Entries 19 The Genesis of the Project 4 Breakouts 19 Adding Units 20 I N T R O D U C T I O N Consistency 21 The Turtle Experiment 6 C H A P T E R 5 C H A P T E R 1 Stops 22 A Complete Trading System 8 Turtle Stops 22 The .
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Richard Dennis, and others regarding the sale of the Turtle Trading System rules by a former turtle, and subsequently, on a website by a non-trader. It culminated in this document, which discloses the Original Turtle Trading Rules
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