James DiMaria came to Richard Dennis with more market experience than most of his fellow Turtles. He had worked in the futures and securities industries since 1976, traded commodity futures at the Mid-America Commodities Exchange in Chicago, and was working as an analyst for Mid-Am Options when Dennis selected him in January 1985 as one of the original Turtle cohort. After the program ended in June 1986, he returned to trading on his own and founded JPD, one of the few original Turtles to keep trading professionally under his own firm.
DiMaria’s take on what the Turtle name means: over the long run, we’re going to win.
The Home Run Theory
DiMaria’s most valuable contribution to the public record of the Turtle experiment is an analogy drawn from baseball statistics. From his home page:
The origins of the Turtle nickname are as obscure as the selection process, though DiMaria advances the notion that the moniker means over the long run, we’re going to win. In 3 1/2 years as a Turtle, DiMaria’s trading results proceeded in fits and starts, and over the long run he came out ahead.
Jim DiMaria learned an important trading principle in the less lucrative arena of baseball statistics: The players who score the most runs are home run hitters, not those with consistent batting records.
It’s the same with trading, DiMaria says. Consistency is something to strive for, but it’s not always optimal. Trading is a waiting game. You sit and wait and make a lot of money all at once. The profits tend to come in bunches. The secret is to go sideways between the home runs, not lose too much between them.
That last sentence is the whole game. Most traders focus on finding more winners. DiMaria’s insight is that the question is what you do between the big trades, whether you bleed out slowly or hold position until the next trend arrives. A system that produces 40% of its annual return in two weeks of a given year is not broken during the other 50 weeks. It is waiting.
This maps to how trend following systems perform in practice. Returns are not linear. They cluster around the periods when large macro moves occur: commodity supercycles, currency crises, interest rate inflection points. The discipline required during the flat periods is what separates traders who capture those moves from those who abandon the system before the move arrives.
More on James DiMaria
The 2013 WBEZ radio feature on Carr, Cavallo and DiMaria, “Checking in With ‘Turtle Traders’ 30 Years Later,” is reprinted on the Michael Cavallo page.
Why the Home Run Analogy Is the Best Available Description of Trend Following Returns
Baseball statistics are the correct analogy because they share the same distributional structure as trend following returns: a small number of exceptional events produce the majority of the value, while the majority of individual events produce modest or negative results. The home run hitter strikes out frequently. The batting average is low. The total bases per season are high. Remove the home runs and the career statistical record collapses. The same mathematics apply to trend following.
The JWH performance data makes this precise. John W. Henry’s largest program produced a 49% annualized return over ten years, but removing the five best months reduced that return to 28%. Five months out of 120 accounted for more than 20 percentage points of annualized return. The other 115 months produced the remaining 28%. The trader who was out of the market during those five months missed 40% of the program’s total annualized return across a decade.
DiMaria’s “don’t lose too much between them” formulation is the risk management corollary. The home run hitter accepts strikeouts as part of the approach. But the strikeout should not result in injury. The Turtle drawdown protocol, which reduced unit sizes by 20% for each 10% drawdown, was the systematic implementation of “don’t lose too much between the home runs.” Protect the capital during the flat and losing periods. Have enough capital when the home run arrives to take full advantage of it.
Frequently Asked Questions
Who is James DiMaria and what is his significance in the Turtle experiment?
James DiMaria was one of the original Turtles selected by Richard Dennis in January 1985, with more pre-program market experience than most of his fellow participants. After the program ended in 1986, he founded JPD and continued trading professionally, making him one of the few original Turtles to maintain an independent systematic trading operation for decades after the experiment. His home run theory is the most widely cited practitioner analogy for the distributional structure of trend following returns.
What does “don’t lose too much between the home runs” mean practically?
It means that during the extended flat periods between major trend events, the correct behavior is preservation of capital rather than forcing trades or increasing risk to compensate for the absence of returns. A system that bleeds capital during the flat periods through overtrading, excessive position sizing, or abandoning the rules will not have sufficient capital to participate fully when the major trend materializes. The flat period is not a failure. It is the waiting period that the approach requires.
How did DiMaria describe the Turtle experiment’s success?
He described it as proving that trading could be taught, while adding the caveat “but maybe not to just anyone.” This is the most honest available summary of what the experiment demonstrated: the rules were teachable, and most of the Turtles who followed them produced positive results. But not all did, and those who didn’t revealed that the teachable component was the rules while the psychological discipline to follow them under adverse conditions was not equally distributed among participants.
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