The Complete Turtle Trader
I did not summarise the human stories and emotions behind it because it would be difficult for me to do justice to the stories. Basically you need to read it to understand the essence. But if you take my word, it just means anyone can be a trader, but you need to put in effort and practise hard.
Practise practise practise.
But I have taken the technical rules of the turtle trading system and symmarise here.
Take note these are the technical rules... do not run too far without the software.
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Trading your Own Account Tip #1
You need to calculate your edge for every trading decision you make, because you can't make "bets" if you don't know your edge. It's not about the frequency of how correct you are; it's about the magnitude of how correct you are.
Trading your Own Account Tip #2
Stop watching TV! Stop looking at financial news.
Start keeping track of the Open High Low, and Close of each market you are trading.
Trading your Own Account Tip #3System One4 week price breakout for entry
-enter if market make a new 4week high (or low for shorting)
-exit if market makes a 2weeks low (or high for shorting)
2week means 10 trading days.
Filters- The turtles ignored System one if the last 4weeks breakout signal was a winner, even if they didnt take it.
If the last 4weeks breakout signal was a 2N loss they could take the breakout ("N" was simply their measure of volatility)
Direction of the 4weeks breakout was irrelevant, if their last trade was a short losing trade and a new long or short breakout hit, they could take it.
Proglem- if the last trade is a winner and turtles have to ignore this new trade, they may miss beginning of a hugely profitable trend. Hence they can use System Two
System Two11weeks breakout (55days) for entry and 4weeks breakout in opposite direction to exit.
Trading your own account #4You are going to live emotionally losing 7 out of 10 trades.
This is the only way you were ever going to hook the real trend.
Trading your Own Account Tip #5Feel free to experiment on the breakout length, do not fixate on specific values. The key will be to accept a breakout value and stick with it consistently. Test and practice are wise for confidence. Trust, but verify.
In reality, a minor change of a variable in any robust trading system should not cause significant pwrformance changes.
Liquidation is vastly more important than initiations. If Turtles applief appropriate risk management they could handle the worst that came down the pike once they were in any trade.
Trading your Own Account Tip #6Stop worrying only about how you enter a trade. The key is to know at all times when you will exit.
Risk Management- how much do u bet on each trade?
Volatility "daily range" "N" maximum of the following
1) distance from today's high to today's low
2) distance from yesterday's close to today's high
3) distance from yesterday's close to today's low.
If the result is a negative number, it is turned into an absolute value.
Max value of the 3 choices is the "true range" or technically the absolute distance (either up or down) the market travelled in a 24hrs period.
This is also the "Average True Range", ATR.
Take the 20days Moving Average
Trading your Own Account Tip #7All turtles must know how to calculate N values.
N is a volatility measurement and a useful rule of thumb to classify how far a market has trended.
Trade the amount in terms of N, remove the emotions in term of money.
N fluctuate, take note of the fluctuation.
Trading your Own Account Tip #82% of your cash is 1 unit.
A Hard stop of 2 N
For example a corn futures is $50
A N of 7 cents, means a risk of $350 ($50 x 7)
2 N means a risk of $700.
If you have a $100,000 account, 2% means you can risk $2000 only.
$2000 / $700 (2N) = 2.67 future contract,
hence, do only 2 contract.
Hence, a corn unit is same as gold unit or a Cocacola Unit. Deal with the markets in number
A hard stop of 2N
If corn futures of 7 cents of N, means 2N = 14 cents.
An entry price of $250 would see a hard stop at $236
Just exit, do not overthink.
A small N means more contracts.
Trading your Own Account Tip #9
Assume a price entry at 100, and a N of 5.
Pile a new unit entry at 105, 110, pyramid till a maximum of 5 units.
On first day of trading, stops may be 1/2N. And from then onwards, 2N stops to be used. Once 2nd unit was bought, both stops brought up to the new unit's 2N stop.
As new units were added, all stops were brought up to the stop of the newest unit added.
Trading your Own Account Tip #10
1) Account size $50,000
Account risk 2%, or $1000.
Long signal in cattle at $74, 1N value is 0.80
1 point in live cattle is $400, so 1N = 0.8 = $320
2N value = $640
Account risk $1000 / $640 = 1.56 contract
Hence Trade 1 contract.
with Stop at $74 - $1.60 = $72.40
2) When price $74 move to $74.80, a new unit is added
Account value is now $50,000 + $320
Account risk 2% = $1006.40
With 1N remaining at 0.80 or $320, 2N = $640
Contract to trade = $1006.40 / $640 = 1.57 or 1 contract
New stop = $74.80 - $1.60 = $73.20
3) Next point to add unit = 74.80 + 0.80 = $75.6
Account value now = $50000 + $640 + $320
Account risk 2% or $1019.20
At $75.60, add 3rd unit, 1N has decreased to $0.70 or $280 hence 2N is $560
Contracts to trade $1019.20 / $560 or 1.82contracts = 1 contract
New stop at 75.60 - 1.40 = 74.20
Add new unit at 1N or 75.60 + 0.70 = 76.30
4) Addition of 4th unit
Account value = $50000 + unit one gain of $920 + unit two gain of $600 + unit three gain of $280
=$51800
Account risk 2% or $1036
at 76.30, 1N = 0.70 = $280, 2N = 1.40 = $560
Contracts to trade = $1037 / $560 = 1.85 contracts hence 1 contract.
New Stop at 76.30 - 1.40 = 74.90
Add new unit at 1N or 76.30 + 0.70 = 77.00
5) Additional of 5th and final unit
Account value = $50000 + unit one gain of $1200, units two gain of $880, unit three gain of $560, unit gain of $280 = $52920
Account risk of 2% or $1058.40
1N has increased to 0.85 or $340
2N value is now 1.70 or $680
Contracts to trade $1058.40 / $680 = 1.55 contract hence 1 contract.
New Stop at 77 - 1.70 = 75.30
Position exit
Live cattle rallied to 84.50 and exit criteria were met.
The pyramid allows profit with big trends, but many false breakouts that eat away capital
To protect capital, for every 10% in drawdown, Turtles cut their trading unit risk by 20%.
If a 11% drawdown happened, their trading size dropped from 2% to 1.6% (2% x 80%)
If a 22% drawdown happened, their trading size dropped from 1.6% to 1.28% (1.6% x 80%)
Unit size goes back to normal when capital goes back up.
One turtle lost 50% of his capital, but ended the year with a bonus when market start clicking.
Statistically, you will face more incidents of losses than wins, but the pyramid allows riding the trends.
Take note that you stop if you reach STOP 2N or via System One or System Two Stop.
Trading your Own Account Tip #11
Can trade any markets with liquidity and volatility, but do not trade 2 markets with high correlation, that would be like trading in 1 market with 2 units.
Diversify into many markets of long and short.
Example portfolio
Long in corn, feeder cattle, gold and Swiss Francs for 4 units
Short in british pound, copper and sugar, for 3 units.
Take the smaller number and divide by 2, subtract from the larger number
4 - (3/2) = 2.5
Thats the units at risk, that is how turtles added more units without adding risks.
The reason to diversify into so many markets is that they do not know when and where would be the next big trends, and they do not want to miss it. Diversify ensure they lose many, but caught on to that big trend.
Gold Coin CML descriptions[/caption]
Magnet Test
One of the easiest way is to use magnet. Most metals are attracted to magnet, but silver and gold are diamagnetic (metals that are not attracted to magnets) and a magnet will not stick to it. Use a very strong magnet, such as neodymium, to test the gold. If it stick to the magnet, then it is fake gold.
Do note that this is not a 100% foolproof test to determine real gold. Some counterfeit gold are made from metals that are not magnetic in nature.
Density Test
Get an accurate scale and note the weight of your Gold bar.
Get a glass of water, place it on the scale, and set the scale to ZERO.
Tie the gold bar, dip it COMPLETELY into the water, but without touching the base of the glass. The gold bar should be in the middle of the water, note this new weight number on the scale.
Divide the first weight of the bar, by the 2nd weight number (in the water), this number should be 19.30 for an accurate measurement of Gold density. (Pure Gold Density = 19.30 g/cm3)
Ultrasound Test.
Using special instrument, you can use an ultrasonic device to test for consistency in a bullion bar. Sound waves travel at different speed through different metal. If your gold bar is merely gold plated, the numbers would differ from a pure gold bar of 99.9 purity. The sound velocity for pure gold should be 3200 meters / second (or 0.130 Inch/µSecond)
Porcelain Test
Rub the piece of gold across a piece of unglazed porcelain tile. It should not make a black streak. If it does then it is pyrite. If the streak is golden yellow then it is gold.
Acid Test
Warning: This test is destructive and will spoil a tiny portion of your gold. Please do not use unless absolutely necessary.
Buy a nitric acid test kit. Scratch a surface of the gold piece and add a few drops of the acid on the gold. If it turns green, the item is either brass metal or gold plated. If it turns milky, it is gold plated sterling silver. If there is no reaction, then it is real gold.
Some key pointers before you buy that gold!
