The Evolution Of The Giant Turtle
Below is a MRR and PLR article in category Finance -> subcategory Currency Trading.
The Evolution of the Giant Turtle
Word Count: 1771
Summary:
The Turtle Trading System, a prominent trend-following strategy established in the early 1980s, has experienced slight shifts over the decades. Despite its ongoing success, subtle changes have been observed: total returns are somewhat lower, drawdowns deeper, and recovery periods longer.Keywords:
Turtle Trading System, Russell Sands, Original Turtle, Forex, Turtle Secrets, Commodities Trading, Futures Trading---
Article Body:
It's often said that the more things change, the more they stay the same. This sentiment holds true for the Turtle Trading System. When I revisited my views in the January 2003 article "I Was Wrong," I acknowledged that trend-following strategies were still very much alive. The years following showed promising results, with the Turtle model gaining 50% and 100% in 2003 and 2004, respectively. Although 2005 started on a challenging note, end-of-year projections appeared positive.
Examining the Turtle system closely, as well as other trend-following strategies, reveals subtle changes since their inception in the 1980s. Rolling five- to ten-year analyses indicate slight declines in total returns, deeper drawdowns, and longer recovery times.
The reasons for this are multifaceted, often falling under natural progression. Trading remains a zero-sum game where the more astute participants prevail. As the winners compete increasingly with each other, the level of competition rises, making trading more complex.
Technologically speaking, the advent of computers in the early 1990s leveled the playing field. Information now flows swiftly, enabling traders to adjust their positions rapidly in response to new data. This accelerates market shifts, requiring traders to be swift and adaptable.
Trends now emerge with explosive force, demanding quick action and resilience from traders. However, these trends often don't extend as far or last as long. For instance, a significant freeze or embargo used to trigger extended price movements in markets like Coffee or Soybeans, but such lengthy trends are rare today.
In previous decades, major moves such as a 40 N gain in Soybeans in 1988 or during the first Gulf War were common. Nowadays, such extensive trends are scarce. To stay profitable, we depend on a few substantial trades each year to compensate for smaller losses and trading costs.
As traders, we must adapt. While triple-digit returns of the past are less frequent, achieving solid returns still surpasses most alternatives. My perspective has shifted recently from waiting for infrequent 40 N trends to seizing 20 N opportunities and exiting with caution.
Decision-making is grounded in math and probability, not emotion. If the probability of a substantial move is reasonable, it's wise to hold on. However, if the chances are slim, securing smaller, sure profits is prudent. This artful balance comes with experience.
In practice, I've become quicker to exit a trade if signs indicate the trend reversal is imminent. Though sometimes I may leave money on the table, I've also avoided significant losses by exiting in time. My broker has observed this disciplined approach as an improvement in my trading skills.
Richard Dennis, a proponent of using discretionary judgment over rigid technical criteria, emphasized the mastery of knowing when and how to apply discretion. This skill is honed through experience. By analyzing various indicators?"stochastics, market profiles, sentiment, and news?"I make informed, intuitive decisions.
For example, last Thanksgiving, I exited currency trends near market peaks, and post-Hurricane Katrina, I sold Energies just following the market's top. While I sometimes exit early, avoiding poor reinvestment decisions has fostered better discipline and patience.
Even when I leave some profits on the table, keeping small losses in check ultimately benefits my trading account. In cases like Unleaded Gas in August, timely exits saved significant losses. This strategy has helped my personal trading account exceed the Turtle model's performance in 2005.
Russell Sands
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