Way of the turtle

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Way of the Turtle

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279
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I N D E X
Against the Gods (Peter Bernstein), 2
Aggregated derivative markets, 217–218
Amaranth, 103
Anchoring, 16, 20, 76–79
Arbitrage, 4, 25, 105, 158
Arndt, George, xxiii–xxiv
Arnold, Tim, xxiii
Assets, liquid, 3
ATR (see Average true range)
ATR Channel Breakout, 131, 136–137
Average maximum drawdown, 188
Average monthly return, 98
Average one-year trailing return, 98
Average true range (ATR), 33, 66–67 (See
also N factor)
Backtesting, 179–206
actual system performance vs.,
196–199
with computer simulation, 133
for long-term trendfollowing, 
132–133, 135–136, 143–145,
147–149
market variable in, 135
money management algorithm in, 136
Monte Carlo simulation with, 199–205
overoptimization in, 133
pitfalls of, 152
predictive errors from (see Discrepancies
between testing and trading results)
R-cubed measure for, 188–189
regressed annual return measure for,
186–188
representativeness of samples in,
192–194
robust Sharpe ratio for, 189–192
robustness of existing measures of,
182–184
size of samples in, 194–195
start and stop dates used in, 184–186
statistical basis for, 180–182
test dates in, 136
with Trading Blox Builder, 143–144
Bandwagon effect, 16, 20
Behavioral finance, 13, 14
Bernstein, Peter, 2
Best fit line, 186
Beyond Greed and Fear (Hersh Shefrin),
13
Biases (see Psychological biases in trading)
Blame, 61–62
Blowups, 116
Bluffs, 157
Bollinger bands, 138
Bollinger Breakout, 131, 137–138
Branscomb, Chuck, 59
Breakouts, 124
as building blocks, 125
cause of, 82
Donchian channel, 68–70
psychological difficulty in trading, 69
trader effects in, 153–155
in Turtle Way, 38–39
Buffett, Warren, 1
Building blocks, 123–129
breakouts, 124, 125
defined, 123
moving averages, 124–127
simple lookbacks, 125, 128
time-based exits, 125, 127–128
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Building blocks (continued)
types of, 124–125
volatility channels, 125, 127, 128
Business risk, 2
CAGR% (see Compound annual growth
rate)
Career tracks, 238
Cars (contracts), 6
Chicago Board of Trade (CBOT), xix
Chicago Mercantile Exchange (CME),
5, 6
Cliffs, 174, 176
CME (see Chicago Mercantile Exchange)
Cognitive biases, 15–21
anchoring, 16, 20, 76–79
bandwagon effect, 16, 20
disposition effect, 15, 19, 78–79
edges from differences in, 75
law of small numbers, 16, 20–21
loss aversion, 15, 16
outcome bias, 15, 19–20
recency bias, 16, 20, 77–78
sunk costs, 15, 16–19
Collective perception, 8
Commodities Perspective, 41
Commodities trading, 249
Complex systems, 195
Compound annual growth rate
(CAGR%), 92, 97–98
RAR% vs., 186–187, 190–192
robustness of, 184–186
Consistency, 230–231
in following rules, 38
as rule for Turtles, 39
in taking entry signals, 261–262
in Turtle Trading System, 273–274
Contract specifications, 5–6
Contracts, 2, 6, 113 (See also Futures
contracts)
Countertrend trading, 23, 26
Cumulative probability curve, 54
Curve fitting, 153, 172–177
Dalai Lama, 239
Day trading, 24–25
Decision making, 13, 14
Degree of roughness, 179
Deluttri, Dale, xxi
Dennis, Richard (Rich), xvii, xix–xxvi
classes taught by, 30–31, 33, 35, 37
and coffee trading, 214–215
on consistency and discipline, 273
drawdown views of, 91
on entries, 269
evaluation of Turtle class by, 44–45
and initial trades of Turtle class, 42–43
N factor used by, 117–119
personality of, 29
principles taught by, 223–224
“secrets” by, xv, 61, 224, 273
as teacher, 231
and trades made by Turtles, 86
trading by, 249
on trading rules, 245
Discipline, 273–274
Discrepancies between testing and trad-
ing results, 151–177
from optimization paradox, 163–172
from overfitting or curve fitting,
172–177
from random effects, 158–162
sources of, 152–153
from trader effects, 153–158
Discretionary trading, 132–133, 224–229
Disposition effect, 15, 19, 78–79
Diversification, 247
across markets, 213–219
in robust trading, 210
of systems, 219–221
Dollar volatility adjustment, 252–253
Donchian, Richard, 38, 258
Donchian channel breakout, 68–70
Donchian channels, 38
Donchian Trend system, 131, 139–140
defined, 131
E-ratio for, 68–70
measures of return for, 98, 99
results of aggressive trading with, 
111, 112
stops with, 144–145
Donchian Trend with Time Exit, 131,
140, 144–145
Douglas, Mark, 232
Drawdowns, 87
defined, 23
longest, 97
maximum, 97, 111, 112