I recently came across the story of the "turtle traders." The system they use seems like a lot of horseshit. Has anyone used, or know anyone that has used the system and been successful? Here is the story for anyone who doesn't know. http://www.investopedia.com/articles/trading/08/turtle-trading.asp
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I'm not a trader but after reading the article it sounds like, as you put it, a lot of horseshit.
Maybe people with more knowledge of technical trading can explain but it sounds like he's just trying to buy when the market is going up and selling as soon as it hints of dropping. But isn't this a worthless piece of advice? The difficulty is knowing WHEN it will "breakout" and even the article admits that most commonly it's just a false "breakout" resulting in losses.
Either way, thanks for sharing that article, interesting read.
i know one energy trading firm who used craiglist to find its traders and used the "turtle" method.....
I read the book and it basically boils down to strict trading rules. They had tight position limits, stuff like that.
^having strict rules does seem like a good strategy though, as we often seem to irrationally/emotionally change our mental limits/stop
Yes, the story of the turtle traders is basically all about people having trouble sticking to strict rules. The people with backgrounds from Wall Street had the most trouble watching their accounts dwindle. I believe the longest stretch of losing days was two years.
What's important to note is that modern science has shown us that stress caused by small but consistent losses actually damages the human brain after a while. Traders were literally DYING in to follow the turtle rules in bad times which is one of the reasons, people broke the rules and were kicked out of the program. That's why the system works, most traders just can't stand the losses so it's basically a behavioral finance anomaly.
Horseshit it ain't, because it worked in the times it was implemented. All the traders that stuck to the rules got rich and a few of them started their own firms. But today, the markets have fewer consistent anomalies and you require huge sums of money to trade the way these guys did, so you need to work for a large institution.
As stated the system followed some very strong risk controls. The reason the system does not work today IS BECAUSE there are too many false breakouts. Back in the 70's and 80's when this system was implemented, the market was less sophisticated and there was not all the algo and HF running around. If a stock broke resistance or support levels there was a good chance that you could see a nice little run.
The turtle system was a simple system that played breakouts and used wide stops to stay in winning trades and try to catch big trends. These systems work sometimes and other times they do not...in trendless markets they get chopped up but they usually catch big moves and therefore trend-followers killed it during the subprime crisis. John Henry's CTAs and other funds that are "systematic trend followers" tend to use systems that are similar to the turtles but with a few more bells and whistles made possible by easier programing now then there was in the 1980s.
I personally am not a systematic trader but i do watch "breakouts" (new highs or new lows) and will often try to play them if the fundamentals behind the trade make sense.
One of the turtles came and spoke to a class i was in last year. He seemed like he was doing pretty damn well and his wife was a knockout. Basically he stressed risk management.
I'm actually a huge proponent of systematic trend-following and I find it a tad bit absurd to claim that such systems don't work anymore given that most CTAs have been making a killing since '08.
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