TRADING STRATEGY TURTLES
Trading strategy Turtles became famous at one time for the ability to trade on the exchange with its help absolutely anyone. It is enough to follow the rules. The strategy has earned millions of dollars. Let’s not forget about her.
Trading Strategy Turtles is a complete trading system. Its rules cover all aspects of trading and leave virtually no questions for the trader to subjectively decide. It has all the components of a complete trading system.
This review is intended to introduce traders to the Turtle trading system and provide them with an alternative to both intraday and long-term analytical systems. In this article, we will consider the basic rules of the system and give some examples of work on it.
BRIEFLY ABOUT THE RULES OF THE TRADING SYSTEM TURTLES
Entrance to the market is carried out when the price goes one tick beyond the high or low borders of the previous 20 days (the price channel indicator is used for visualization).
- If the price exceeds a 20-day high, a long position is opened for the corresponding financial instrument.
- If the price drops one tick below the 20-day low, a short position opens.
- The entry signal is ignored if the last break led to a profitable trade (see note).
Note: To check, the last break was considered regardless of whether there was a real entry into the position during this break or if the break was missed due to this rule. It was believed that this signaled to a losing trade if the price after the breakout passed a distance of two average daily volatilities ( ATR indicator with a period of 20 ) in the opposite direction of the breakout before a profitable 10-day exit occurred.
The direction of the last break does not matter for this rule. Thus, a “loss-making long” or “loss-making short” break allows you to enter a position on the next break, regardless of whether it is “long” or “short”. However, in the case when the breakthrough was missed due to the fact that the previous one was “profitable”, the entrance will be made on the 55-day breakthrough so as not to miss a big move.
Profit-taking too early is one of the most common mistakes when trading on trend systems.
Prices never go straight up; you must allow prices to go against you if you are going to ride a trend. In the early trend, this can often mean that 10–30 percent profit can be replaced by a small loss. In the middle of the trend, 80-100 percent profit may fall by 30-40%. The temptation to lighten a position by taking profits can be very great.
Profitability or loss-making of all trade depends on the profit-taking point.
The exit was carried out upon reaching a 10-day low for long positions and a 10-day high for short ones. All units were withdrawn from the market if the price went against an open position for a 10-day break.
EXAMPLES OF WORK ON THE TURTLE SYSTEM
Let’s look at a few examples of how the system works on historical data. As working tools, we will choose the EUR / USD currency pair, the lead futures contract and BMW shares. These are very different assets, which proves the profitability of the strategy.
As can be seen in Figure 1, the previous long position on the EUR / USD instrument turned out to be unprofitable, which allows us to expect entry when the price overcomes a 20-day high or low. If there is a trend movement, a successful position is able to cover losses from several losing trades and bring significant profit.
As can be seen in Figure 2, after a loss-making long position on the lead futures, we opened a short position, which brought us significant profit. We should skip the next overcoming at the price of the 20-day channel (see note), however, it is quite possible to continue the trend, in which case an entry will be made after breaking through the 55-day low (dark blue line)
As can be seen in Figure 3, the previous entry into the short position turned out to be unprofitable, which allowed us to open the opposite position at the next break of the 20-day high, which is currently not closed and is profitable. Let’s hope that the continuation of the trend will bring us significant profit, but do not forget about the active protection of the position with stop orders, which should be moved after 10-day lows (blue channel).