Way of the turtle

Turtle Money Management 
Means Staying in the Game
The primary goal of trading should be to stay in the game. Time is
on your side. A system or method with positive expectation even-
tually will make you rich, sometimes beyond your wildest dreams.
This can happen only if you can continue trading. For traders,
death comes in two forms: a slow painful death that causes traders
to stop out of anguish and frustration and a spectacular rapid death
we refer to as a blowup.
Most new traders overestimate their tolerance for pain, believ-
ing that they can live through a 30 percent or 40 percent—or 
perhaps even a 50 percent or 70 percent—drawdown when they
can’t. This can have an extremely adverse effect on their trading
because it usually results in their stopping completely or changing
methods at the worst possible time: After they have incurred a draw-
down and suffered significant losses.
The uncertainty of the future is what makes trading so difficult,
and people do not like uncertainty. Unfortunately, the reality is that
the markets are unpredictable and the best you can hope for is a
method that generally works over a relatively long period. For this
reason, your trading methods should be designed as much as possi-
ble to reduce the uncertainty you can expect to encounter when
trading. The markets are already uncertain enough; there is no sense
adding to that variability with poor money management practices.
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Way of the Turtle

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Since the Turtle Way is not to predict which markets will trend
and which trades will be successful, as Turtles we approached each
trade with the same expectation and commitment. To the extent
possible, that meant risking the same amount of capital in each
market. Implementing money management according to the Tur-
tle Way increases the likelihood that you will achieve consistent
returns because our approach adjusts for the relative volatility and
risk between markets. 
Oversimplified strategies such as trading one contract per market
and methods that do not normalize for volatility can cause trades in
certain markets to overshadow those in other markets. So, even a
large gain in one market may not compensate for a small loss in
another market if the losing market has a much larger contract.
Although many traders intuitively know this is true, many still
use fairly simplistic mechanisms for deciding how many contracts
to trade in any specific market. For example, they may trade one
contract of S&P 500 futures per $20,000 in the trading account.
They may have used this same formula for the last 10 years, during
which time that market’s volatility has fluctuated greatly. These
rule-of-thumb approaches can increase the variability of returns
unnecessarily.