Way of the turtle

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Way of the Turtle

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that used 60-day (12-week) highs and lows to determine the break-
out. We would calculate the most extreme highs and lows for each
system at the end of each day. Generally, this meant looking back
to determine one or two prices that were the high on the basis of
their visual appearance. Most days, the highs would remain the
same and there would be no work to do. Each system had two types
of exits. The first was a stop loss exit that was a maximum of 2N, or
two average true ranges away from the entry point. This also hap-
pened to represent 2 percent of our account because the way we
determined the number of contracts to trade per market also was
based on N (average true range).
The lessons of the Turtle class can be summed up in these four
points:
1. Trade with an Edge: Find a trading strategy that will
produce positive returns over the long run because it has a
positive expectation.
2. Manage Risk: Control risk so that you can continue to trade
or you may not be around to see the benefits of a positive
expectation system.
3. Be Consistent: Execute your plan consistently to achieve
the positive expectation of your system.
4. Keep It Simple: The core of our approach was simple: catch
every trend. Two or three trades might account for all your
profits, so don’t miss a trend or you might kill your whole
year. This is simple and easy to understand, not easy to do.
This last point is an important one, as you will see in the fol-
lowing section when I discuss our actual trading. The details of our
The First $2 Million Is the Toughest
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39

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specific approach were not as important in my mind when we
started trading as were being consistent and not missing a trend.
These simple concepts were easily missed when we started to put
real money on the line. 
Things Heat Up
Our two weeks of training completed, the class was eager to begin
trading. We returned to Chicago after the New Year holiday, and
each one of us was given a desk in a large office on the eighth floor
of the Insurance Exchange building right next to the CBOT on
Jackson.
The desks were arranged in pairs of six that had six-foot parti-
tions between them. We each had the chance to choose a desk, and
that meant that we selected the person we would be sitting next to
for the indefinite future. Each desk had a telephone with a private
line that rang directly at that desk.
The Turtles were given a sheet each week that listed the num-
ber of contracts per million in the trading account for each of the
markets we traded. However, to simplify the process for the prac-
tice trades, we were told to use a fixed unit size of three contracts
for each market. We were to take a position of at most 4 units or 12
contracts for each commodity we traded. That roughly corre-
sponded to an account size of $50,000 to $100,000.
We had full discretion over our accounts and could make any
trades we wanted as long as we stated the reasons behind a trade
and followed the general outlines of our system. We did this by
maintaining a log for the first month that indicated the reasons
behind every trade we made. Most of my entries were of the fol-