This website was named TurtleTrader and the phrase “turtle trading” was coined by Michael Covel because it described a great story about how a group of non-traders were taught to trade for big profits. Some of these original TurtleTraders have continued to be successful while others have failed in grand fashion.
Jack Schwager’s ‘Market Wizards‘ books originally positioned these traders as winners all, but secretive and reluctant to share their so-called “secrets” with the world. Today, TurtleTrader remains the ONLY independent voice on this subject revealing the pros, cons and myths.
If you want to know the true story, if you want to know the exact lessons, we are the only source to help your education. The following (2) books paint a true picture of the trend following trading system and the turtles:
The Complete TurtleTrader (Collins, 2009)
An Excerpt from The Complete TurtleTrader
Relating to the Turtle Trader System and Rules of commodity option trading:
What is the equity being traded? The Turtles had to know how much money they had at all times, because every rule they would learn adapted to their given account size at that moment.
What is the system or the trading orientation? Eckhardt instructed the Turtles that in advance of the market opening, they had to have their battle plan set for buying and selling. They couldn’t say, “Okay, I’ve got $100,000; I’m going to randomly decide to trade $5,000 of it.” Eckhardt did not want them to wake up and say, “Do I buy if Google hits 500 or do I sell if Google hits 500?” They were taught precise rules that would tell them when to buy or sell any market at any time based on the movement of the price.
The Turtles had two systems: System One (S1) and System Two (S2). These systems governed their entries and exits. S1 essentially said you would buy or sell short a market if it made a new twenty-day high or low.
What is the risk aversion of the trader or client? Risk management was not a concept that the Turtles grasped immediately. For example, if they had $10,000 in their account, should they bet all $10,000 on Google stock? No. If Google all of a sudden dropped, they could lose all $10,000 fast. They had to bet a small amount of the $10,000, because they didn’t know whether or not a trade was going to go in their favor. Small betting (for example, 2 percent of $10,000 on initial bets) kept them in the game to play another day, all the while waiting for a big trend.
Day after day, Eckhardt would emphasize comparisons. Once he told the Turtles to consider two traders who have the same equity, the same system (or trading orientation), and the same risk aversion and were both facing the same situation in the market. For both traders, the optimal course of action must be the same. “Whatever is optimal for one should be optimal for the other,” he would say.
Now this may sound simple, but human nature causes most people, when faced with a similar situation, to react differently. They tend to outthink the situation, figuring there must be some unique value that they alone can add to make it even better. Dennis and Eckhardt demanded that the Turtles respond the same or they were out of the program (and they did end up cutting people).
Why the Three Questions Define Everything
The Complete TurtleTrader excerpt frames the Turtle system as answers to three questions: what equity is being traded, what system or orientation guides decisions, and what risk aversion governs position sizing. These are three of the five questions that every complete trading system must answer. The excerpt does not explicitly state the remaining two, when to exit losing positions and when to exit winning positions, but the S1 and S2 systems address them through defined trailing stops and breakout exits.
Eckhardt’s “battle plan in advance” requirement is the pre-commitment principle that the entire systematic trading framework rests on. The Turtles could not wake up and decide how to react to the day’s price action. They had to know before the market opened exactly what conditions would trigger a buy, a sell, an add-on, and an exit. This pre-commitment is what makes the approach systematic rather than discretionary. The emotions that attach to watching a position in real time cannot distort decisions that were already made when the emotions had not yet formed.
The “whatever is optimal for one should be optimal for the other” principle is Eckhardt’s statement of the system’s objectivity requirement. Two traders with the same inputs must produce the same outputs. If they do not, the system is not the system. One or both traders are injecting personal judgment into a process that was designed to exclude personal judgment. Dennis and Eckhardt enforced this by removing Turtles who deviated. The system’s integrity depended on every participant following the same rules in the same situations.
The desire to “outthink the situation” is what Eckhardt was training against. Every smart person who has ever managed money has believed they could identify the unique value they could add to a mechanical system. The Turtle experiment demonstrated that the people who added that value added it by following the rules, not by overriding them. The Turtles who succeeded did so by suppressing the outthinking impulse. The Turtles who failed did so by acting on it.
Frequently Asked Questions
What were the Turtle System One (S1) and System Two (S2)?
System One used a 20-day breakout entry: a position was opened when price made a new 20-day high (for longs) or 20-day low (for shorts). System Two used a 55-day breakout entry. Both systems used defined exits based on N-multiples of the Average True Range, the same volatility measure used for position sizing. S1 produced more frequent signals and more false breakouts. S2 produced fewer signals but captured larger trends. The Turtles ran both systems simultaneously on the same markets.
Why did Eckhardt require a battle plan before the market opened?
Because decisions made in advance, before positions are established and emotions are activated, are more accurate than decisions made while watching a live price fluctuate. The pre-market battle plan defines entry conditions, exit conditions, and position sizes based on rules rather than real-time emotional responses. A Turtle who had already decided that they would buy crude oil if it made a new 20-day high did not need to make a judgment call when that high occurred. They executed the predetermined rule.
Why did Dennis and Eckhardt remove Turtles who deviated from the rules?
Because the experiment’s validity depended on the rules being followed consistently. A Turtle who overrode the system was not trading the system. They were trading a combination of the system and their own judgment. If that Turtle produced different results from a Turtle who followed the system purely, the difference could not be attributed to the system. Dennis and Eckhardt were testing whether the rules could be taught and whether people would follow them. Removing deviators maintained the experiment’s integrity and confirmed that the rules, not individual judgment, were producing the results.
Trend Following Systems
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