Turtle is a type of Trading strategy forex trend following concept called "Trend Follower". This is based on a simple mechanical rules to enter trading when prices fall from short-term channels. The goal is to follow a long-term trend from the beginning.
Turtle Trading was born from an experiment in 1980 's by Richard Dennis, a pioneering trader futures traders debating whether either are born with an innate talent, or is there anyone who can be trained to perform trading with success. Turtle Tradingmechanical trading system that can be used by the trader of any discipline, regardless of previous experience.
The name "Turtle Trading" has been associated with several possible origins. For traders, it symbolizes the result "slowly but surely" of this system. Unlike the complex black box system, regulation of Turtle Trading is fairly simple and easy for you to build your own system and is a recommendation from traders.
One group of forex traders named Indonesia Monster Turtle Academy (MTA) founded by founded by Vincent Vishnu in 2014 also educates hundreds of traders Indonesia with very intensive use of the concept of strategy Trading Turtle technique.
The earliest form of the Turtle Trading is manual. And requires a difficult calculationfor the moving average and limit risk. But now, traders can use algorithms based onparameter turtle trading to guide traders headed a successful trading. As always, the key to trading success lies in the consistent discipline.
Which is the best market for Turtle Trading?
The first decision is which market will be traded. Turtle Trading based on long-termtrends change.
CME Group, Agriculturals, the options for Corn, Soybeans, and Soft Red Winter Wheat. Best equity index is E-mini S&P 500, E-mini NASDAQ100 and E-mini Dow. In the Group Energy, E-mini Crude (CL), E-mini Heating Oil and natgas.
In FOREX group, AUD/USD, USD/CAD, EUR/USD, GPB/USD, and USD/JPY. From group Interest Rate Derivatives, Eurodollar, T-Bonds, and the 5-Year Treasury. In the Group of Metals are Gold, Silver and Copper.
Because Turtle Trading is a long-term endeavor with a limited number of incomingsignals, we should choose a Futures Group. As mentioned above.
Position Size
With Turtle Trading, position size or size/Lot/Volume will affect money management and diversification. So, how much should be bought/sold should refer to it.
So, for continuity of trading risk management depends on the selection of the proper positions. Earlier mechanical trading systems must be reprogrammed to make sure it doesn't run out of money before the benefit.
Constant percentage risk based on volatility
Key in the Turtle Trading is to use risk-based volatility position remains constant. Programkan algorithm of Position Size so that it will smooth out volatility by adjustingthe size of the position in accordance with the value of each type of order.
This will go very well. Turtle Trader positions consisting of fewer contracts and more expensive, or a more expensive contract, regardless of the underlying volatility in certain markets.
For example, when Turtle Trading sell mini contracts that require, say, $3000 in the margin, traders buy/sell only one order, whereas when the trader entered the futures position with the order that requires the $1500 margin, traders buy/ selling 2 order.
This method ensures that trading in different markets have the same opportunities for loss or profit. Even when the volatility in certain markets lower, through the TurtleTrading success in that market, traders will still win big because traders hold more order with changes that are not stable.
How to calculate and take advantage of volatility – the concept of "N"
Turtle Trader earlier using the letter N to indicate the underlying market volatility. Nis calculated as a moving 20-day True Range (TR).
An explanation in simple terms, N is the price movement of one average day in certain markets, including opening up the gap. N is expressed in the same unit as futures orders.
We have to program the system to calculate the True Turtle Trading Range like this:
True Range = the greater of:
TR = (a Maximum of) TH – TL or TH – PDC or PDC – TL
Daily N is calculated as follows: [(19 x PDN) + TR]/20 (where the PDN is N and TR days earlier is True Range these days.)
Because the formula requires the previous day value for N, we will start with the firstcalculation is simple with only the 20-day average.
To determine the size of the position, the system programkan the Turtle Trading to calculate volatility of an underlying market in terms of value N.
Dollar volatility = [Dollars per point of contract value] x N
At the moment we feel do not like risk, we set 1 N is equal to 1% of the equity of our account. And, at the moment when we feel more like risk, or when our account more withdrawn than usual, we set 1 N is equal to 0.5% of the equity of our account.
The unit for the size of the position in a specific market is calculated as follows:
1 unit = 1% equity account/market volatility
Means the same as:
1 unit = 1% of your account equity/([Dollars per point of contract value] x N)
This is an example for Heating Oil (HO):
For HO dollars per point is $42,000 because of the size of his contract was 42,000 gallons and his contract is quoted in dollars.
Assuming the account size Turtle Trading amounted to $1 million, for the next trading unit size (the 23rd day of the series above) is calculated using the value N =. 0141 to 22 for the day are:
Unit size = [001 x $1 million]/[. 0141 x 42.000] = 16.80
Because partial contracts can not be traded, in this example the position size is rounded down to 16 contract. We can program the algorithm for calculating the size andunit N weekly or even daily.
Position size helps build a position with constant volatility risk in all markets traded.This is important for Turtle Trading using the largest accounts, even when just doingmini trading.
We must ensure that the fractional position size will allow us to swap at least one contract in each market. Small accounts will become prey to the granularity.
The beauty of the Turtle Trading is N capable of managing the size of the position as well as the risk of the total portfolio and risk positions.
Turtle Trading risk management rules dictate that we should program a mechanicaltrading system to limit exposure in the single market to 4 units, exposure in the market that correlates with a total of 8 units, and total "exposure direction" (i.e. long orshort) in all markets with a total of a maximum of 12 units in each direction.
Check-in time when you use the system of Turtle Trading
Calculation of N above gives us the position size accordingly. The Turtle Trading System and mechanically will produce a clear signal, so that the automatic entry is easy to do.
We will enter the market price when the option dropped from channel Donchian. Breakouts are marked when prices move beyond the highest level or lower than the previous 20 days.
Regardless of the availability of the e-mini trading throughout the day, we just entered on the trading sessions during the day. If there is a price gap that opens, we enter trading if prices move toward the target.
We enter the trade when the price moves one tick past the high or low level 20 the previous day.
Order size
When we receive a signal from a mechanical trading system breakout, automatic login with order 1 size unit. The only exception is when, as mentioned above. In this case, we include ½ unit size.
Furthermore, if the price continues with the direction expected, the system automatically adds to the position with the addition of 1 unit at each additional ½ N price movement while the price continues to the desired direction.
Mechanical trading system continue to add up to the limit position is reached, say on a 4N as has been discussed previously.
This is an example of the inclusion of gold (GC) Futures:
N = 12.50, and long breakout is $1310
We bought the first unit in 1310. Purchase of second unit at a price [1310 + (½ x 12.50) = 1316.25] rounded to 1316.30.
Then, if the price moves continues, the purchase of a third unit at [1316.30 + (½ x 12.50 = 1322.55] rounded to 1322.60.
Finally, if gold goes forward, I bought the last fourth unit at [1322.60 + (½ x 12.50) = 1328.85] rounded to 1328.90.
In this example, the progress of prices continues in a short period so that the value of N is not changed. However, easy programming of mechanical trading system to keep track of everything that is running, including changes in N, position size, and entry point.
Turtle trading stops
Turtle Trading involves a lot of small losses while waiting to catch a long term change in trend is a big winner.
The automatic Trading System of the Turtle helped confidence and discipline by removing emotional components of trading.
Stops based on the value of N, and there is no single trading representing more than 2% risk to our account. Stops set at 2N since N each of the price movement is equal to 1% of the equity of our account.
So, for long positions on the set stop-loss in 2N under the actual entry point (orderfill price), and for short positions stop being in 2N above my entry point.
To balance the risk of adding additional units to a position that has been moving in the direction desired, I gave my stops to previous entries by ½ N.
This usually means, we will put all the stops for the total position in the 2N from the newly added unit last. However, in the case of markets that are open, or move quickly, the way stops will be different.
The advantage of using the N-based stops are obvious – Stops based on market volatility, which balances the risks at all points of entry.
Out of Trading
Because Turtle Trading, means we have to suffer a lot of "strikes" to enjoy a bit of "profit", be careful not to get out of the way too fast.
Mechanical trading systems programmed for the lowest level out at 10 days old, and entries on at highest position 10 days for short positions. If the threshold is breached 10 days, the system will exit automatically from the overall position.
Mechanical trading systems help overcome greed and our emotional predispositions for closing a profitable trading too early.
Turtle Trading algorithm offers a quick way to build a mechanical trading system do-it-yourself alone are simple, easy to understand and effective.
If you have the discipline and let a mechanical trading system do its work, Turtle Trading is probably the best choice.
However, the turtles were slow, but usually they win the race! Good luck!
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