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/ roclicol sommory o
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
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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 longrunning debate, 0ennis created a reallife 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.
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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
multimillionaire, and they learned not to be subject to the emotional biases and impulses
that make so many traders fail.
n 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 14 of the profits, while 0ennis
would take 85. 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 trendfollowing trading using a technical approach.
n 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 selfdestruct. 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.
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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 getrichquick 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 eventempered.
- 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 decisionmaking, 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.
f you want to make Turtlelike 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:
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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 trendfollowing 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, selfreliance, 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 trendfollowing traders, but also to anyone who aspires to success in the market.
To your success,
Andrew 8arnett...
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