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Turtle Trading Rules: Then & Now

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Everyone involved in trading has probably heard about so called “The Turtles” – a well-publicized experiment by Richard Dennis. Some still try to peddle the “turtle trading system” for thousands of $ and generally Dennis/Turtles are mentioned as evidence that trend-following works.

The rules are published in a book and and on web pages by persons who seem to have authentic information.

I Y2006 I did backtest “the turtle trading rules” on several markets. The conclusions are very straightforward.

CONCLUSION 1:

The turtle trading system produced phenomenal profits till about mid-80’s. Even trading 1 contract as a base position, each market shows millions of dollars in profit.

The chart below is the performance of USDCAD contract.

turtle

In about 10 years [1976 to 1985] even trading 1 contract in USDCAD would turn $100k into nearly $4 million – an astounding 40 x increase. So the claim that Dennis became very rich by following these simple rules is possibly true.

CONCLUSION 2:

Somehow the system stop to perform in all the markets in 1987-88 period, except for GBPUSD which shows postive returns till 1991. In no market the system has reached a new equity peak since 1991. Most show steadily negative or haphazardly flat performance for the last two decades. This may explain why Dennis reportedly finished his career with a loss of about 1/2 of the equity.

The Turtles may have its place in the annals of trading history, but the turtle trading rules are less than useless in today’s market. It’s snake-oil of trading. I wouldn’t trust anybody who promotes it as a valid trading system.

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Written by A.S.

June 8, 2009 at 12:03 am

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