The turtle trading strategy is an innovative and effective way to trade in the financial markets.
An investor’s chances of generating money and minimizing losses in trades both improve when they adhere to some trading discipline or set of guidelines.
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Therefore, it stands to reason that rules such as the turtle strategy must be adhered to if one wishes to succeed in cryptocurrency trading.
If you’re interested in using the turtle trading method to trade cryptocurrencies, you’ll need to familiarize yourself with the regulations and abilities specific to this market.
In this article, you will learn about the turtle trading strategy and the breakout and trend-following trading techniques that use the turtle trading methodology.
What Is Turtle Trading?
The term “turtle trading” refers to a trading method used to capitalize on market trends that have been going strong for some time.
The objective is to make trades in accordance with predetermined guidelines that leave little room for emotion.
A broad variety of financial markets have made use of this strategy. Traders who use this strategy look for asset-wide “breakouts” even though prices may move in different directions (up or down).
Also Read: Martingale Trading Strategy
Richard Dennis and William Eckhardt came up with the idea for the turtle trading experiment. Dennis taught 14 different “turtles” to make rational choices based on established protocols rather than on instinct.
This experiment’s research design and outcomes laid the groundwork for what is now recognized as the valid decision-making process of “turtle trading.”
By the early 1980s, Dennis had already achieved phenomenal success in the trading world. He had parlayed a capital of less than $5,000 into well over $100 million.
He and his business partner Eckhardt often spoke about their achievements. However, Eckhardt argued that Dennis’s success in the futures markets was due to a unique talent that couldn’t be taught to anybody.
Dennis designed the experiment to provide definitive answers to these questions. Dennis would gather a crew of followers, brief them on his strategy, and then have them engage in live trading.
Dennis put his money in the hands of the traders to invest since he was so confident in his ideas. The program might be repeated every two weeks for maximum effectiveness. He dubbed his students “turtles” after seeing Singapore’s turtle farms and concluding that he could grow traders just as rapidly and effectively.
The Origin of Turtle Trading Experiment
At the beginning of the 1980s, Richard Dennis was a seasoned commodities trader with a track record of success.
Some say he began off in the early 1970s with only $1,600 borrowed to invest and made $350 million over the course of six years. Dennis and his business partner William Eckhardt often reviewed their trading performance and brainstormed ways to increase it.
Dennis was of the opinion that anybody could be taught to trade profitably in the futures markets.
However, Eckhardt thought Dennis had an innate ability that made him a good commodities trader. Dennis determined to prove his theory and end the argument by devising an experiment.
The Turtle Trading Experiment
Dennis’s characterization of his class as “turtles” is the inspiration for the experiment’s name.
Those who completed his two-week training program in which he outlined the parameters of his trading system were given some of his own money to invest.
The study’s objective was to teach novice investors a purely algorithmic approach to the investing process.
Dennis’s principles aimed to help traders make rational choices without being influenced by their emotions. The experiment and the approach were developed to ensure that traders would make judgments based on nothing but the rules.
Dennis was aware that he could write all of these guidelines into a newspaper article but that only a minority of traders would follow them. His extensive experience in the field taught him that most traders “improvise” when they deem it essential, using trading rules as a framework.
Dennis believed that sloppy adherence to these guidelines would lead to unprofitable trades. Two weeks were allotted for the duration of the trial. Dennis called his class “turtles” after visiting turtle farms in Singapore. He thought that, like turtles, successful merchants might be cultivated rapidly and effectively.
The Outcomes
Despite the experiment’s length (five years! ), its findings were never formally shared with the scientific community. On the other hand, a former “turtle” called Russell Sands, who passed away in 2019, said that the two groups of turtles that Dennis mentored made over $175 million over five years.
The lesson here is that even someone with no trading experience may learn the ropes and eventually become a successful trader.
Although not all “turtles” were successful, those stuck to the rules significantly improved. After launching Chesapeake Capital more than three decades ago, it is managed by Jerry Parker, a “turtle” who continues to adhere to the system’s tenets.
Even while current investors won’t be able to get one-on-one instruction from Dennis (who is still politically active and the president of Dennis Trading Group Inc.), the guidelines he developed may still be used.
The primary objective is to buy price declines or rises once a breakout occurs and exit the deal.
Although participants in the turtle trading experiment had moderate success, there are still several concerns to be aware of before implementing the strategy into your crypto transactions. Most importantly, this trading strategy often results in substantial drawdowns.
As a result, many traders lose money since the bulk of the breakouts they put their money into turn out to be fake. Investors prepared for drawdowns still have a chance of generating significant returns.
Does the Turtle Trading Strategy Truly Work in the Crypto Market?
Many investors have utilized the turtle trading method on cryptocurrency exchanges throughout the years. The outcomes have been disappointing. High earnings are hard to come by while using the original turtle trading strategy from the 1980s. With the new restrictions in place, however, we are making more money and less often trading.
Based on historical performance, shorting is not recommended in the bitcoin market. When you use the principles of turtle trading, you’ll see that shorting doesn’t provide many advantages and might result in a loss of cash if you set many stop-losses during a bull run.
Regarding pricing, crypto assets tend to be highly correlated with one another. The original turtle trading strategy wasn’t optimized for crypto since it was designed for use with little correlated markets. The following are some adjustments that need to be made to the turtle trading method before it is used to make crypto transactions.
- Whether deciding when to enter or quit a trade, consider using a moving average.
- Try using data from other periods, such as 30 minutes, 4 hours, or 6 hours of trade.
- Try other stop levels, such as three points above or below the entry for a long position.
- Use turtle trading tactics as a testing ground for different methods of equity allocation.
Does Turtle Trading Work for Crypto Markets?
Many investors have utilized the turtle trading method on cryptocurrency exchanges throughout the years. The outcomes have been disappointing. High earnings are hard to come by while using the original turtle trading strategy from the 1980s. With the new restrictions in place, however, we are making more money and less often trading.
Based on historical performance, shorting is not recommended in the bitcoin market. When you use the principles of turtle trading, you’ll see that shorting doesn’t provide many advantages and might result in a loss of cash if you set many stop-losses during a bull run.
Regarding pricing, crypto assets tend to be highly correlated with one another. The original turtle trading strategy wasn’t optimized for crypto since it was designed for use with little correlated markets. The following are some adjustments that need to be made to the turtle trading method before it is used to make crypto transactions.
- Whether deciding when to enter or quit a trade, consider using a moving average.
- Try using data from other periods, such as 30 minutes, 4 hours, or 6 hours of trade.
- Try other stop levels, such as three points above or below the entry for a long position.
- Use turtle trading tactics as a testing ground for different methods of equity allocation.
Are Turtle Trading Rules Worth Trying?
Every investor is looking for a foolproof method to guarantee a significant return when trading cryptocurrencies. The turtle trading rules that were previously described aren’t necessarily ideal for everyone, even if you manage to make the right trades at the right moments. Both novices and seasoned pros may use the turtle trading approach with little difficulty.
It may take some time to determine whether turtle trading is suited for you since outcomes are highly influenced by strategy and risk tolerance. Many of the original “turtles” in the turtle trading experiment did, in fact, do rather well for themselves.
However, Dennis lost a great deal of money in the stock market collapse of 1987. Thus his own experience shows that this isn’t a failsafe method. A solid foundation for each trading choice is essential, regardless of your chosen trading technique.
Conclusion
Turtle trading is a novel method that allows investors to try out an approach to trading that eliminates the influence of emotions. The original principles for this technique were developed in the 1980s, when the turtle trading experiment took place, but have since been updated. Before using this tactic with your trades, you need to think about this truth.
