45351432 the Original Turtle Trading Program

8/3/2019 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.


3/17

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

[email protected]

TIM ZURICK NFA ID [email protected]

Documents

45351432 the Original Turtle Trading Program