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Explained: The Turtle Trading Strategy
Source: | Author:finance-102 | Date2023-02-15 | 651 Views | Share:
The Turtle Trading Strategy is a trend-following trading strategy developed by Richard Dennis and William Eckhardt in the 1980s. The strategy is based on the idea that a group of novice traders can be taught to trade successfully using a set of specific rules. The Turtle Trading Strategy involves using a combination of technical indicators and price action to identify trends in the market. The strategy is designed to capture the momentum of a trend and stay in the market for as long as the trend persists.

The Turtle Trading Strategy is a trend-following trading strategy developed by Richard Dennis and William Eckhardt in the 1980s. The strategy is based on the idea that a group of novice traders can be taught to trade successfully using a set of specific rules. The Turtle Trading Strategy involves using a combination of technical indicators and price action to identify trends in the market. The strategy is designed to capture the momentum of a trend and stay in the market for as long as the trend persists.


Here are the basic rules of the strategy:


  • Entry rules:

    Trade in the direction of the long-term trend (as defined by a 20-day moving average).

    Enter a long position when the price breaks above the highest high of the previous 20 days. Enter a short position when the price breaks below the lowest low of the previous 20 days.

    Use a stop-loss order to limit the potential loss on each trade.

  • Exit rules:

    Exit a long position when the price drops below its 10-day low.

    Exit a short position when the price rises above its 10-day high.

  • Position sizing:

    Calculate the volatility of the market (using the average true range, or ATR) to determine the size of the position.

    Use a fixed percentage of the trading account to determine the dollar amount to risk on each trade.

    Adjust the position size based on changes in the volatility of the market.

  • Risk management:

    Use a stop-loss order on each trade to limit the potential loss.

    Use a trailing stop to protect profits as the price moves in the direction of the trade.


These are the basic rules of the Turtle Trading Strategy. However, traders may modify the rules or use additional indicators to suit their own trading style or market conditions. It's important to note that no trading strategy is foolproof, and traders should always conduct thorough research and testing before implementing any strategy.


The Turtle Trading Strategy has several advantages that have made it popular among traders and investors:


  • It is a systematic approach: The Turtle Trading Strategy is a systematic approach to trading, which means that it relies on specific rules and guidelines for entering and exiting trades. This takes the emotion out of trading and helps to reduce the impact of cognitive biases that can affect traders' decision-making.

  • It is a trend-following strategy: The Turtle Trading Strategy is a trend-following strategy, which means that it seeks to capture the momentum of a trend. This can lead to profitable trades, particularly in markets with strong trends.

  • It uses risk management: The strategy uses a position sizing method that is based on the volatility of the market to control risk. This helps to limit losses and protect capital.

  • It is a diversified strategy: The strategy involves trading a diversified portfolio of markets, which can help to reduce risk and increase potential returns.

  • It has a proven track record: The Turtle Trading Strategy was developed by successful traders Richard Dennis and William Eckhardt and has been used by traders and investors around the world with a track record of success.


Overall, the Turtle Trading Strategy is a well-established approach to trading that has a number of advantages for those looking to implement a systematic, disciplined, and diversified approach to trading. However, it is important to remember that there are no guarantees in trading, and the strategy may not be suitable for everyone. It is important to conduct thorough research and testing before implementing any trading strategy.


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