Way of the turtle


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Way of the turtle the secret methods of legendary traders PDFDrive

134

Way of the Turtle


can do the math but do not understand that the math does not 
matter if next week is radically different from the last two weeks.
Don’t confuse experience with expertise or knowledge with 
wisdom.
Common Building Blocks
The testing described in this chapter was performed using a com-
mon portfolio of markets and a common money management algo-
rithm to keep the differences in results isolated to those effects
which are due to changes in the rules of the system. Here are the
variables used in the testing discussed in this chapter.
Markets
The markets in the testing portfolio include the Australian dollar,
the British pound, corn, cocoa, the Canadian dollar, crude oil, cot-
ton, the euro, the eurodollar, feeder cattle, gold, copper, heating oil,
unleaded gas, the Japanese yen, coffee, cattle, hogs, the Mexican
peso, natural gas, soybeans, sugar, the Swiss franc, silver, Treasury
notes, Treasury bonds, and wheat.
These markets were selected from the liquid (high-trading-
volume) U.S. markets. A few liquid markets were eliminated
because they were very highly correlated with other, more liquid
markets. We decided to limit our testing for these purposes to U.S.
markets because many of the providers of historical data sell the
information for foreign markets separately. For that reason, many
new traders start with the U.S. markets only, and we wanted to
make it as easy as possible for traders to duplicate our results in their
own testing.
Turtle-Style Trading: Step by Step

135


Money Management
The money management algorithm used here was the same as that
used by the Turtles except that we employed a figure that was half
as aggressive. Instead of equating 1 ATR to 1 percent of our trad-
ing equity, we equated it to 0.5 percent. To arrive at number of con-
tracts for the test, we divided 0.5 percent of the equity by the value
of a given market’s ATR in terms of dollars at the point when the
orders were entered for a specific trade.

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