45351432 the Original Turtle Trading Program
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Transcript of 45351432 the Original Turtle Trading Program
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The Original Turtle Trading Program
Atlantic Pacific Trading Group
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There is a substantial risk of loss in trading futures and options. Past
performance is not indicative of future results.
Any decision to purchase or sell as a
result of the opinions expressed in this report will be the full responsibilityof the person authorizing such transaction.
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Richard J. Dennis of C&D Commodities is accepting applications for theposition of Commodity Futures Trader to expand his established group of
traders.
Mr. Dennis and his associates will train a small group of applicants in his
proprietary concepts. Successful candidates will then trade solely for Mr.
Dennis: they will not be allowed to trade futures for themselves or others.Traders will be paid a percentage of their trading profits, and will be
allowed a small draw. Prior experience in trading will be considered, but is
not necessary. Applicants should send a brief resume with one sentence
giving their reason for applying to:
C&D Commodities 141 W Jackson, Suite 2313 Chicago IL 60604 Attn:
Dale DellutriApplications must be received by October 1, 1984. No telephone calls will
be accepted.
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Background
y An initial group of 13 people were selected and trained
y Dennis funded each trader with $500,000 to $2,000,000accounts
y Result: Over the next four years, the Turtles averaged an
80% annual return
y What were the Turtles taught?
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What the Turtles Knew
y 10 year non disclosure agreement expired 1993
y One Turtle began selling the rules in the mid 90s
y Other Turtles thought selling the rules dishonorable
y So they published the rules online for free
y Richard Dennis was fine with that, believing that few traders
would have the discipline to follow the rules anyway and
the markets would change
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Time out
y What were the rules? 1. Channel breakout 2. Trend
following 3. Trailing stops
y Why did they work? 1. Objective 2. Limited losses/let
profits run 3. No prediction
y When do they not work? Flat markets
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General Features of the Turtle System
y Comprehensive set of rules 5 major decisionsy
Disciplined rules eliminate emotional or subjectivedecisions
y Does not predict pricey Instead, reacts to the market direction trend
following system
y Adds positions to winners, gets out of losers
y Objective: limits losses, lets profits run
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Decision 1: Markets traded
y Liquidity is the main criterion no aluminum, no broiler
chickens
y
Traders were given a menu of liquid contracts from which tochoose
y Some discretion: instructed to diversify
y Did not trade grains due to Dennis personal position limits
or meats due to the perception that they were less thanhonest pits at that time
y Traded interest rates, stock indices, softs, currencies metals
and energies
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Decision 2: Position Sizing
y Number of positions are limited to manage potential
exposurey Risk units are based on recent volatility Average True
Range
y Recent volatility is translated into equal dollar units based on
contract size: Ny N unit represents the same risk across commodities: 1%
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Position Sizing /Correlated Markets
Level Type Maximum Units
1 Single Market 4 Units
2 Loosely Correlated Market 10 Units
3 Single Direction - Long or Short 12 Units
Single Market / Single direction
Closely Correlated Markets - heating oil and crude oil; gold and silver
Loosely Correlated Markets - gold and copper; silver and copper
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Position Sizing /Adjustment to
Drawdown
y Size Adjustment 10% drawdown results in 20% reduction
in notional account sizeExample
Trading $1,000,000 notional, account draws down (10%,
$100,000) leaving $900,000
New notional account size: $800,000 until balance returns toyearly starting equity
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Decision 3: Entries
Based on Donchian channel breakouts
System 1 - A short term system based on a 20-day breakout.
System 2 - A simpler long-term system based on a 55- days breakout.
System 1 Entry
Price > average 20-day high = buy one unit (long position)
Price < average 20-day low = sell one unit (short position)
System 2 Entry
Price > average 55-day high = buy one unit (long position)
Price < average 55-day low = sell one unit (short position)
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Decision 4: Stops
N = 1% of account equity , maximum stop: 2N, 2% of account equity
Crude Oil example
N = 1.20 55 days breakout/buy entry point = 28.30
Initial stop = 2N or 2.40 points
EntryP
riceInitial Stop
First Unit 28.30 25.90
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Stops / Additional positions
N = 1.20 55 days breakout = 28.30
New position
Entry Price Stop
First Unit 28.30 27.10
Second Unit 28.90 27.70
Third Unit 29.50 28.30
Fourth Unit 30.10 28.90
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Decision 5: Exits
System 1 exit = 10 days low/high for long positions
System 2 exit = 20 days low/high for long positions
Waiting for a 10 or 20 days new low can often
mean watching 20%, 40% even 100% of
significant profits evaporate
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What to Expect
y 65 75% losing trades
y Extended periods of inactivity
y Negative start and periods of negative returns
y Small losses, larger wins
y Losses managed with trailing stops - never loosened
y
Winners permitted to runy Always some giveback on exit
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CONTACT
Atlantic Pacific Trading Group
www.aptg.us NFA ID 0419905
702 463 0784
JASONAUGUSTINE NFA ID 0296058
TIM ZURICK NFA ID [email protected]