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Turtle Trader Practical Summary

Turtle Trader Practical Summary

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8y Vichael W. Covel
What started as a bet about whether great traders were born or made turned into a famous
experiment and one of the greatest trading stories of all time. The legendary "Turtles" were
ordinary people who were trained to become extraordinary traders.
Peport by Andrew 8arnett
Page 1 of 5
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The Turtles were taught everything they needed to know in two weeks.
They were taught a basic philosophy and basic trading strategies.
All 2J novice investors became millionaires.
They proved that "the little guy" can beat the market.
They proved that, when it comes to being a great trader, nurture beats nature.
Wall Street legend and Chicago's reigning trader king, Pichard 0ennis, who in 1974 had be·
come a millionaire at age 25, believed that profitable trading was a skill that could be taught
to anyone. His business partner, William Eckhardt, disagreed; he believed you were either
born with trading skills or you weren't.
To end the long·running debate, 0ennis created a real·life social experiment. Pecruiting his
student guinea pigs through classified ads, he gathered together a remarkably diverse group
of trainees that he called the "Turtles."
The Turtles ended up making millions for themselves and over a hundred million for their
The Turtle experiment began in 198J and ended in 1988. For years the story was a combina·
tion of speculation and legend until Vichael Covel started pursuing the facts in 2004 and then
published his book in 2007.
Page 2 of 5
While Eckhardt believed there was something subjective, intuitive, even mystical, that made
someone a good trader, 0ennis believed the skills of a successful trader could be reduced to a
set of rules. For him the markets had strategies, rules, odds and numbers that were objective
and learnable. As a young trader, he had developed a mathematical system to calculate risk.
0ennis demonstrated to the Turtles that money was a tool and that it was all about leverage.
As apprentices, the Turtles learned to use the statistical methods that had made 0ennis a
multi·millionaire, and they learned not to be subject to the emotional biases and impulses
that make so many traders fail.
Ìn 198J, out of a thousand applicants, 0ennis and Erkhardt interviewed 40 people and chose a
highly eclectic group of 1J recruits to be their first of two Turtle cohorts: high school grad to
Harvard Ph0; kitchen worker to blackjack dealer to computer programmer.
The traits they looked for included: a willingness to take calculated risks, unconventionality,
an interest in games of chance, an ability to accept learning, and the emotional and psycho·
logical makeup to treat money abstractly. 8ut most of all, they chose people who they
thought could subsume their egos.
What the Turtles were taught was the antithesis of what was - and still is - taught in finance
departments at top universities. The trading rules they had to absorb would have made the
investors of the day cringe. No buying and holding; no buying low and selling high.
8ut the Turtles were being taught by a guy who had made S200 million on the trading floor, so
they listened, even when it sounded crazy.
0ennis taught his proprietary trading concepts (which was unheard of) and he put his own
money in the hands of amateurs (also unheard of). Each student received S1 million to trade
as they saw fit. The arrangement was that they would take 14º of the profits, while 0ennis
would take 85º. As apprentices, they were thrown into the fire and challenged to make mon·
ey almost immediately, with millions at stake.
The Turtles were trained in trend·following trading using a technical approach.
Ìn only two weeks, 0ennis and Eckhardt taught their students everything they needed to know
to trade bonds, currencies, oil, stocks, and all other markets.
They were taught in a quiet office with no T7S, no computers, and only a few phones; never
on the trading floor. 0ennis knew that traders had a tendency to self·destruct. At the Chicago
8oard of Trade, his placid demeanor had always been in sharp contrast to the wild shouting
and gestures of other floor traders.
Page 3 of 5
0ennis believed in keeping his emotions in check and the battle with self was where he fo·
cused his energies. He felt intuition was completely overrated in trading and that luck had no
role whatsoever.
While other traders got up early to read weather and crop and government economic reports,
0ennis avoided them - and so did the Turtles.
The foundation of 0ennis and Eckhardt's trading style was the scientific method - pragmatic
thinking that had nothing to do with hunches or secrets or get·rich·quick schemes. Just as it
had worked for 0ennis and Eckhardt, it would prove to work equally well for the Turtles. Their
first strategy lesson was how to manage risk.
Four of their core axioms were:
- 0o not let emotions fluctuate with the up and down of your capital.
- 8e consistent and even·tempered.
- Judge yourself not by the outcome, but by the process
- Know each day what your plan and your contingencies are for the next day.
The Turtles were trained to follow a series of rules, which are laid out in detail in Covel's
book. Here are some examples:
Know your edge. Think of Las 7egas - a small edge keeps casinos in business. Turtles
were told: the important thing is to limit portfolio risk; the trades will take care of
0nce you're clear on using price for your decision·making, don't look at television or
the financial news. Start keeping track of the open, high, low and close of each mar·
ket you are tracking - that's all the data you need to make all of your trading deci·
Feel free to experiment on breakout lengths; don't fixate on specific values. The key
will be to accept a breakout value and stick with it consistently.
Ìf you want to make Turtle·like money, use leverage. Always manage your leverage use
and don't let it get past your limits.
Stop worrying only about how you enter a trade; the key is to know at all times when
you will exit.
From the first day of training, the Turtles were given five questions that were considered rel·
evant to an optimal trade. They had to be able to answer these questions at all times:
What is the state of the market:
What is the volatility of the market:
Page 4 of 5
What is the equity being traded:
What is the system or the trading orientation:
What is the risk aversion of the trader or client:
0ennis succeeded in teaching all 2J of his student recruits to use his trend·following method·
ology and make millions in the trading market. All of them became millionaires and together
they made 0ennis over S100 million. The Turtle experiment proved 0ennis' premise that
traders were made, not born. And many of his students went on to make 100 percent or more
per year over four years - monster moneymaking that made them Wall Street's newest rock
0ne of the most interesting sections of Covel's book is the chapter that discusses the most
successful of all the Turtles, Jerry Parker, who is still a hugely successful trader. Covel dis·
cusses why some Turtles carried on being successful over the years while others didn't.
With 0ennis, the Turtles had an incubator situation. 8ut then, when you leave your mentor,
you're not just trading; you're running a business. Covel notes that Parker has all the traits of
a great entrepreneur - drive, energy, resilience, self·reliance, and the fortitude to keep play·
ing the game.
Parker still points back to his core training with 0ennis. He insists that having a teacher or
mentor is "the greatest thing going," that it gives you a foundation and it gives you confi·
dence, and then you just keep going and you just keep learning.

8ecause Covel so clearly lays out all of the Turtle ingredients for success, the book is relevant
not just to trend·following traders, but also to anyone who aspires to success in the market.
To your success,
Andrew 8arnett...
Page 5 of 5
Di scl ai mer
The aut hor may be cont act ed at success@LTGGoldRock.com
Copyright © LTG GoldRock 2010
All right s reserved. No part of t his book may be reproduced or t ransmit t ed in any form or by any means,
elect ronic or mechanical, including phot ocopying, recording or by any informat ional st orage and ret rieval
syst em, wit hout prior permission in writ ing from t he publisher.

The mat erial in t his publicat ion is of t he nat ure of general comment only, and neit her purport s nor
int ends t o be advice. Readers should not act on t he basis of any mat t er in t his publicat ion wit hout
considering (and if appropriat e, t aking) professional advice wit h due regard t o t heir own part icular
circumst ances. The aut hor and publisher expressly disclaim all and any liabilit y t o any person, whet her a
purchaser of t his publicat ion of not , in respect of anyt hing and of t he consequences of anyt hing done or
omit t ed t o be done by any such person in reliance, whet her whole or part ial, upon t he whole or any part
of t he cont ent s of t his publicat ion. Live Trader Global GoldRock Pt y Lt d is a corporat e Aut horized
Represent at ive of The I nt ernat ional securit ies and Derivat ives Group Pt y Lt d (AFSL 227544 ABN 22 103
552 683). Trading involves t he risk of loss as well as t he pot ent ial for profit . The aut hor of t his book t akes
no responsibilit y for t he individual invest ment decisions t he reader of t his book t akes and recommends all
readers of t his book consult a licensed financial planner prior t o making a decision t o invest in Foreign
Currency Trading. Please refer t o t he LTG GoldRock Financial Services Guide (FSG) and/ or
supplement ary FSG if required, which can be found on t he websit e www.lt ggoldrock.com before
undert aking t his form of invest ment . Any advice given is general advice only.

There are no guarant ees or cert aint ies in t rading. Reliabilit y of t rading signals for mechanical syst ems is
in probabilit ies only. Trading real money involves hard work, risk, discipline and t he abilit y t o follow rules
and t rade t hrough any t ough period. I f you are looking for guarant ees, t rading is not for you. The
pot ent ial t o lose money is real. Many people lack t he discipline and are unable t o be consist ent . A syst em
can help you become consist ent . The abilit y t o be disciplined and t ake t he t rades is equally as import ant
as any t echnical indicat ors a t rader uses. I ronically, worrying about t he money aspect of t rades can
cont ribut e t o and cause a t rader t o make t rading errors. Therefore, it is import ant t o only t rade real
money wit h a risk capit al plan. The reader of t his book acknowledges t hat LTG GoldRock recommends
and advises all it s members t rack and keep t heir own stat ist ical result s on t rades and t o develop a t rading
plan in accordance wit h t his analysis. They t ake complet e responsibilit y for t heir t rades and acknowledge
and accept t he risks associat ed wit h Forex t rading.

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The potential to lose money is real. Reliability of trading signals for mechanical systems is in probabilities only. There are no guarantees or certainties in trading. without prior permission in writing from the publisher. in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance. Trading involves the risk of loss as well as the potential for profit. The reader of this book acknowledges that LTG GoldRock recommends and advises all its members track and keep their own statistical results on trades and to develop a trading plan in accordance with this analysis. The material in this publication is of the nature of general comment only. worrying about the money aspect of trades can contribute to and cause a trader to make trading errors.com before undertaking this form of investment. and neither purports nor intends to be advice. Trading real money involves hard work.com Copyright © LTG GoldRock 2010 All rights reserved. discipline and the ability to follow rules and trade through any tough period. They take complete responsibility for their trades and acknowledge and accept the risks associated with Forex trading. If you are looking for guarantees. Live Trader Global GoldRock Pty Ltd is a corporate Authorized Representative of The International securities and Derivatives Group Pty Ltd (AFSL 227544 ABN 22 103 552 683). trading is not for you. Please refer to the LTG GoldRock Financial Services Guide (FSG) and/or supplementary FSG if required. whether whole or partial. taking) professional advice with due regard to their own particular circumstances. recording or by any informational storage and retrieval system. A system can help you become consistent. risk. which can be found on the website www. it is important to only trade real money with a risk capital plan. The author and publisher expressly disclaim all and any liability to any person. The author of this book takes no responsibility for the individual investment decisions the reader of this book takes and recommends all readers of this book consult a licensed financial planner prior to making a decision to invest in Foreign Currency Trading. Ironically. including photocopying. No part of this book may be reproduced or transmitted in any form or by any means.Disclaimer The author may be contacted at success@LTGGoldRock. The ability to be disciplined and take the trades is equally as important as any technical indicators a trader uses. Any advice given is general advice only. Many people lack the discipline and are unable to be consistent.ltggoldrock. electronic or mechanical. whether a purchaser of this publication of not. Therefore. Readers should not act on the basis of any matter in this publication without considering (and if appropriate. . upon the whole or any part of the contents of this publication.

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