The Turtle Trading Way: Rules for Long-Term Profit
Created in the 1980s, the concept of Turtle Trading has been recognized as one of the most refined strategies to follow trends in the market. This strategy emerged from an experiment where 13 participants were aspiring to successful trading.
The Turtle Trading Strategy is a trend-following system that employs the Donchian channel and puts a special focus on the traders’ behavior and their skills to stick to and follow a set of rules to trade consistently.
Traders Richard Dennis and William Eckhardt developed the rules for the system that those participants needed to follow. The main idea behind the system is that trending markets are the most complex part of the price movement of financial instruments.
Difference between Rules
Traders Richard Dennis and William Eckhardt created two rules for trading. One for short-term and one for long-term. What makes one rule different from the other?
Rule #1, which aims for short-term opportunities, uses the 20-period Donchian channel to establish the price breakout:
- Traders will place a buying order on the breakout of the upper part of the channel if the last signal is a loss.
- Traders will sell on the breakout of the 20-day lower part if the last signal was a loss.
Something important to remark on this strategy is that it resolved that the channel breakout signal should be ignored if the last signal had been profitable.
Another thing is that if the trader ignores the signal from the short-term system and the market continues its trend, he would have to use the rule #2 system to get back into the market.
In that case, will take the long-term system from rule #2.
The rule #2, is a simple long-term approach. It uses a 55-period Donchian and requires to:
- Execute a buy order when the upper line of the 55-day channel is broken if you are not in the market.
- Execute a sell order when the lower line of the 55-day channel is broken if you are not in the market.
Learn more on Turtle trading rules at Altrady!
Turtle Trading Rules For Long-Term Success
Now, up to this point, we have discussed the technical aspect of the rules behind turtle trading way. However, we can also remark on some rules that belong to the traders’ behavior.
One of the main purposes of the Turtle Strategy is to overcome emotions when traders are in the market.
So, one behavior traders should aim for is coherence and balance, which ultimately will lead to consistent results.
The discipline to follow a plan without hesitation is also required by this system. Turtle traders need to stick to the plan day by day, even during losing streaks.
Check out also: Turtle Trading Strategy: History of Turtle Trading!
Conclusion
The turtle trading way is a system that implements a trend-follow strategic approach. It is composed of two technical rules and remarks on crucial aspects concerning the behavior of traders to be successful with this strategy.
