Way of the turtle

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Way of the Turtle

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you have 10 losing trades in a row and you are sticking to your plan,
you are trading well; you are just having a bit of bad luck.
Forget the Past
Ironically, as well as thinking too much about the future, most
traders dwell too much on the past. They worry about what they
have done, the mistakes they have made, the trades in which they
have lost money.
Turtles learn from the past but don’t worry about it. They don’t
berate themselves for mistakes they have made. They also don’t crit-
icize themselves for trades in which they lost money; they know
that is part of the game. 
Turtles view the past holistically and don’t put any particular
emphasis on recent events. The recent past is no more important
than any other historical time period; it only feels that way. Turtles
avoid recency bias. They know that most of the traders in the mar-
ket exhibit this tendency, and for that reason, the market often
shows evidence of the same bias. The ability to avoid recency bias
is an important component of successful trading.
I saw the crippling effect of recency bias firsthand long after the
Turtle program had ended. Once the program had been com-
pleted, each Turtle had to wait six years before the confidentiality
agreements expired and we could tell others about the methods we
used to trade. I had a couple of close friends who were interested
in learning those methods because they knew how well the system
worked for me.
In 1998 I taught one of them my methods after warning him
that consistency was the key. I told him that he had to execute all
Think Like a Turtle 
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the trades religiously or he would not be successful. So what did
he do? He became a victim of recency bias.
Around February 1999 I asked him how he was doing in cocoa
since I had noticed that there was a great downward trend. He told
me that he did not take the trade because he had lost so much trad-
ing cocoa and thought that the trade was too risky. Table 4-1 shows
the cocoa trades one would have encountered by trading breakouts
from April 1998 until the trade with the large trend occurred. Note
that there are 17 losing trades in a row in the cocoa market before
a very sizable winning trade that started in November 1998.
This is typical of what you should expect to encounter in trading.
If you consider a single market at a particular point in time, things
can look very bleak. You may go several years before finding a single
good trend in some markets. If you focus too much on the recent past,
you will be tempted to think that certain markets are not tradable.
My friend was not unique. Most traders are plagued by the
recent past. Some of the Turtles were affected by it so strongly dur-
ing the program that they never traded successfully and finally were
cut. Ironically, it seems that just about the time everyone else gives
up, trends appear and tend to be easy to ride and extremely prof-
itable. We’ll examine this phenomenon in more detail later in
Chapter 13 in our discussion of portfolio and market analysis.