Understanding the Turtle Trading System with One Picture: 100% Public! Revealing the secret to success in making billions of dollars in profits! The success or failure of a transaction depends on your personal determination and discipline. And can we continue to use the same method for trading when we are in a low tide. And his method has two major characteristics: opportunistic trading and long-term trading. This is also an important principle for formulating turtle trading rules. Richard Dennis later wrote down his trading rules and turned them into program trading. ◎ Trade with the flow One of the key points of the Turtle Trading Law is to trade along the trend. The belief in following the trend of trading is to believe that prices will continue. If the price is rising, believe that it will continue to rise until it stops rising. If the price is falling, believe that it will continue to fall until it stops falling. For Richard Dennis, the two essential elements for profit are risk management and opportunistic trading. Both of these elements are the fundamental essence of the Turtle Trading Rule, and everyone must take notes or carefully record them. Risk management and opportunistic trading were key points that Richard Dennis learned when he entered the investment market at the age of 21. ◎ Choose market The first rule of turtle trading is to choose the market. Before choosing a market, it is important to observe which market the product trend belongs to. Richard Dennis divided the market into four states: static equilibrium, dynamic equilibrium, static trend, and dynamic trend. The difference between static equilibrium and dynamic equilibrium is that static equilibrium has smaller fluctuations and dynamic equilibrium has larger fluctuations, but both ultimately result in consolidation. The pullback amplitude of the static trend is relatively small, and the market is clearly moving in one direction. The pull back of the dynamic trend is significant, but the market is also moving in one direction. For those who engage in opportunistic trading and enjoy long-term trading, static trends are a better choice. There isn't much fluctuation, and the market is heading in the same direction again. For those who engage in contrarian trading, they tend to prefer dynamic stability because of the large fluctuations and aggressive guessing. When doing trading, one must first observe and choose a market that suits their own operating methods. Although people who trade along with the trend can also do it, if the pull back is relatively large, they may follow the direction but stop loss due to the pull back. Starting from a probabilistic perspective, rather than predicting the future The second key point of the Turtle Trading Rule is to view things from a probability perspective, rather than predicting the future. During turtle training, Richard Dennis first taught them the concepts of probability, fund management, bankruptcy risk, and expectations, all of which are related to game theory. So it is not difficult to see that the students he selected are all people who have a concept of probability. This includes accountants, gamers, poker players, and so on. The biggest mistake in investing is thinking that you can predict the future. ◎ Trade with the trend and enter the market by breaking through the system The way to enter the market according to the Turtle Trading Law is mainly to follow the trend of trading and enter the market by breaking through the system. For example, there are many ways to enter the market by breaking through the high and low points of the interval. This includes the Tangchian channel system, ATR channel breakthrough system, Bollinger breakthrough system, as well as double moving averages, triple moving averages, interval high and low point breakthroughs, and others. In short, they all use breakthrough systems for entry. There are two commonly used channels, the Tangqi'an channel is a candlestick high and low point that breaks through 10 or 55 days. The ATR channel breakthrough system uses three lines to form a price channel. When the price breaks through the upper channel, go long, and when it breaks through the lower channel, go short. 02. Entry and exit signals in the turtle trading system The turtle trading system uses specific rules when entering and exiting transactions. For example, to enter a long position (buy), traders will look for a price breakthrough on the 20th. This means that asset prices should be higher than the highest price of the previous 20 days. On the contrary, to enter a short position (sell), traders will look for a downward breakthrough in the price on the 20th. Trading in the turtle trading system is also rule-based. For example, traders use trailing stop loss orders to lock in profits and minimize losses. With the market's preference for trading, this stop loss order will be adjusted to ensure that profits are protected while providing growth space for trading. Turtle traders are taught to trade in a complete trading system environment. ◎ Market - What to buy or sell 1. Turtle traders trade all important futures, cryptocurrency, stock markets, precious metals, forex, and commodities. 2. Turtle traders trade multiple markets to achieve risk diversification. Position size - how much to buy or sell The position size of turtle traders is based on market volatility, using the 20 day moving average true volatility (ATR) of the index. 2. Turtle traders are taught to gradually increase their trading positions by 1% of the total account net value. ◎ Entry - When to buy or sell 1. Turtle traders use the Tangqian Trend Breakthrough System for trading. System 1 enters the market after breaking through the 20 day high and exits after breaking through the 10 day low. System 2 entered the market after breaking through the 55 day high and exited after breaking through the 20 day low. 3. Increase positions in the profit trend. ◎ Stop loss - When to exit a losing position As mentioned above, System 1 will appear at the 10 day breakthrough in the opposite direction, while System 2 will appear at the 20 day breakthrough in the opposite direction after entering. 2. Any transaction will not take more than 2% of the net asset value of the account, and a corresponding stop loss strategy will be formulated. ◎ Strategy - How to buy or sell Confidence, consistency, and discipline are the most critical factors for successful trading. 2. Turtle traders believe that successful traders use mechanized trading systems. They only trade in the liquidity market. Turtle traders buy when strong and sell when weak, control risk, and follow their rules. 03. Risk management and position size strategy There are two reasons why using the turtle trading system may fail. One is a false breakthrough, such as short selling a false breakthrough and eventually going in the opposite direction. Or fake breakthroughs to go long, but prices go in the opposite direction. In this situation, it is relatively easy to lose money by trading through the breakthrough system. Another one is a significant pullback, which is the dynamic trend mentioned earlier. If the market retracement is too large, the stop loss will be easily destroyed, and there will be a significant price increase later on. Both of these situations are breakthrough trades that may result in losses. The way to improve is to switch to other entry methods. The most important aspect of trading is fund management and finding ways to survive in the market. To control trading losses, this also conforms to the risk control of the "Zurich speculation law". And Richard Dennis' approach is to keep the single loss within 2% of the principal as much as possible, because he can only lose up to twice the ATR. The same commodity can be traded up to 4 positions, which means it can be increased up to 3 times. Finally, the key point to introduce is the addition of funds in the Turtle Trading Rule, which is also the most advanced skill in the Turtle Trading Rule. The essence of fund management is to choose between the following two. The first one is to take on big risks, and eventually lose everything and be forced to leave. The second one takes minimal risk and ends up with a large amount of cash on hand, which doesn't earn much depending on the direction. That is to say, the concept of placing large bets and small bets. If you place a large bet, the risk is high and the profit is also high. If you place a small bet, the risk is small and the profit is small. Most people will doubt whether it's better to place a big bet or a small bet? The answer is through the use of the Jesse Livermore markup method, which is the markup method of the Turtle Trading Rule. We can achieve minimal risk but significant profit by increasing our investment. One of the additional conditions for turtle trading is to increase the price every 1/2ATR. For example, if the volatility of a certain trading variety is 2.5 and it breaks through the entry on the 55th day, the entry price is 310. So the price of the first size is 310, and the price of the second size is 310 plus 1/2 multiplied by 2.5, resulting in a price of 311.25. The third size will be 311.25 plus 1/2 multiplied by 2.5, and the price will be 312.5. Similarly, the fourth size price is 313.75. After reaching the fourth level full position, there will be no further increase. How can we further control the risk of complex calculations like this? The answer is simple. First, set a stop loss when entering the market, and when increasing, move up the original exit position to the original cost price position when entering. When adding the third code, move the exit position to the entry cost price position of the second code. By analogy, this method can ensure that once a loss occurs, only the last yard will be lost, and no matter how many yards are played earlier, a profit can still be made to exit. The turtle trading system adopts a "fixed proportion position size" strategy to manage risk. This means that traders allocate a fixed percentage of their account balance to each transaction. They usually bear a risk of 1% -2% on each transaction. Dennis hopes to take the maximum risk in the highest probability of trading. By assuming only a small portion of the account's risk in each transaction, traders can minimize the impact of losses and control overall risk. This method can also allow them to utilize the compound interest effect and obtain greater returns as the account balance increases over time. 04. Diversification and Portfolio Management Skills Diversification is another important component of the turtle trading system. Encourage traders to diversify between different markets and asset classes to help diversify risks and increase overall returns. This may include trading various commodities, foreign exchange, and stock indices. The turtle trading system also emphasizes the importance of portfolio management. By actively monitoring and adjusting positions, traders can ensure that they are not excessively exposed to any single market or asset class, and maintain a balanced investment portfolio that is consistent with their risk tolerance. The importance of discipline and consistency in turtle trading Discipline and consistency are crucial for the success of the turtle trading system. Following rules and sticking to plans is essential, even in times of market turbulence or trading difficulties. Firm adherence to the system enables traders to withstand market fluctuations and ultimately achieve success. It is worth noting that the turtle trading system is not 100% reliable, and no system can guarantee profitability. However, by maintaining discipline and consistency, traders can increase their chances of long-term success. The key to the turtle trading system is to create a good risk/return ratio in the main market trend direction, manage risks, and maintain discipline. 06. Adjust the turtle trading system to adapt to modern markets Although the turtle trading system was developed in the 1980s, its principles are still relevant today. However, traders may need to make adjustments to adapt to market conditions and technological changes. For example, the rise of algorithmic trading and high-frequency trading may require traders to adjust their in/out signals or add additional filters to avoid false breakthroughs. In addition, the emergence of new asset classes such as cryptocurrencies like Bitcoin provides more opportunities for diversification. Traders can also utilize modern tools and platforms to help manage investment portfolios and execute trades more efficiently. conclusion The turtle trading system is a fascinating and historically successful trading method. It emphasizes trend following, risk management, diversification, and discipline, providing a solid backing for any trader who wishes to take risks in the unpredictable financial world. Although the system may require some adjustments to adapt to modern markets, its core principles remain relevant and provide valuable insights for both beginners and experienced traders. By understanding and applying the lessons learned from the Turtle trading system, anyone can succeed in the trading world and promptly grasp important trends in the market.