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A Real Turtle Trading Story, Compliments of acturtle
drrc
post Posted: May 1 2008, 04:32 PM
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http://www.compareshares.com.au/fras44.php

 
forrestgump
post Posted: May 13 2004, 08:40 AM
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G'day Gadget,

I'm glad that you enjoyed that discussion.

I had hoped that more people would put on their thinking caps in those quiet moments between enormously profitable trades to enter this type of discussion. But not so, it seems.

Even though I have now been closely involved on a daily basis with the markets as a personal investor for some 5 or so years, I still consider myself to be in the learning phase. I suspect that I will still be saying the same thing in another 5, 10 or 20 years.

Aside from the (hopefully) financial benefits of coming to grips with the trading/investing beast, one of the greatest joys that I have found has been the (all to rare) opportunity to interract on an intellectual basis with others through forums like this one. Being a "sole trader", as I guess many of us are, we can (well, I can, anyway) become slightly stale in our thought processes. Sometimes putting a thought "out there" can assist in breaking through. Being forced to present our ideas logically and clearly, in a manner digestible by others can, in itself, help to make these breakthroughs. The added benefit of getting others opinions, twists or different perspectives can result in spectacular personal growth.

If you are interested in this sort of stuff then there are a few other threads under "Investment Strategies" that I have contributed to that may be worth reading (and contributing to?). Much of it relates to Turtle Trading strategies but I am more than happy to discuss the wider issues that may evolve.





--------------------
Peace
Fforrest

Try to be as good a person as your dog thinks you are.
 
Gadget
post Posted: May 7 2004, 12:38 AM
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hypocrite.gif now all i have to do is press print, and i've got myself a new bible =)

cheers guys, great posts! =) apprecited by millions of investors all around the globe =).



 
forrestgump
post Posted: Dec 23 2003, 08:50 AM
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You again Oavde? biggrin.gif

Maybe you and I are the only ones interested in discussing techniques other than "plunge on todays hot tip". rolleyes.gif

Yes you have zeroed in very well on what is probably the most important part of the TT strategy. Ie using some form of risk analysis to make a justifiable decision. So many systems don't even make the vaguest of attempts to specify how much of your capital should be placed on a trade. I maintain that, even for those not interested in TT per-se, an understanding of risk analysis and it's relationship to that "how much" question is of huge importance. And it's not even that hard to understand!

In simplistic terms what you have said in your post is correct, though the specifics are not, of course, those of TT.

A generally accepted amount of capital to risk on a trade by Turtle Traders is about 2%. I have found that it is quite common for people to misunderstand this and to interpret this as saying that your trade size should be only 2%. This is not the case.

If you think about it then the amount that you lose on a losing trade is a combination of your position size and your stop. (doh!)

I hope, in the following weeks and months, to go into these issues in greater detail but in simple terms;

The Turtles use a 20day Exponential ATR (Average True Range) as the basis for their position sizing. This figure is called N. They then simply calculate a position size such that a future movement of 1N would result in a movement of their total capital of 1%.

Turtle stops are set at 2N away from the entry price.

There are many risk/statistical/probablilty issues that need to also be discussed in relation to all of this. There are so many exciting avenues to be explored in building a sound basis for trading.

One of the techniques that I use to help myself understand issues that I am unfamiliar with is to "run it out to the extremes". This is something that we do as a matter of course when developing computer programs, so it comes naturally to me.

As an example. If we have a series of trades that each have a 99% chance of being successfull and we risk our entire capital on each trade then invevitably we will end up broke (sooner or later). An obvious statement but one that helps clarify the need for Money Management.

Oavde, as you indicate, you have strategies other than TT that you prefer (but I also note that you, like me, are willing to put in the work to make your decisions based in understanding). I have suggested to the asxboard management that a forum be dedicated to "Trading/Investment Strategies" with Turtle Trading and the numerous other strategies becoming sub-forums of this forum. They have indicated that once an interest in this type of discussion has been indicated then they will re-arrange things in this way. I am sure that you have much knowledge that could be shared/discussed/dissected under such an arrangement. I sincerely believe that we can all benefit from this type of discussion, as an adjunct to the currently far more poular stock based discussions.

I, for one, am interested in discussing the basis for TA. I find that many people use various TA indicators without really understanding what they represent, or attempt to track. To me, pure TA is an attempt to measure the mass psychology of the market. This sort of relates to the "sub topic" that we have been discussing (the propensity of people to make certain decisions when certain things happen. eg doubles, quadruples, hits a round dollar amount etc ..) But this is a whole 'nother story....







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Peace
Fforrest

Try to be as good a person as your dog thinks you are.
 
Oavde
post Posted: Dec 19 2003, 11:06 PM
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forrest, the turtles do adjust things on a per stock basis, not for the entry and exit, but in measuring the risk based on average true range for a stock over a recent period, the best way to explain would be like

$100,000 to invest

can risk only $10,000 at a time

stock A: on average moves around 15%
stock B: on average moves around 5%

if dividing up between the two, instead of putting $5,000 in each, you'd put three times as much into stock B than stock A ... so

A = $2,500
B = $7,500

something like that. Which is a much better approach than most, would would put $50,000 in one and $50,000 in the other, risking 100% of their capital and not making the distinction between the two.

Although also I'd modify the breakout / days required

actually stuff that, I'd use something completely different since there are so many better ways to do things

as for fibonacci, people are funny, they think in terms of halving, doubling, one - third etc... one quarter, prices tend to follow




Said 'Thanks' for this post: colaiscute  
 
forrestgump
post Posted: Dec 18 2003, 01:14 PM
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G'day Oavde,

Thanks for your post - many things expressed better than I am able to do, even if there are a couple of points that we perhaps differ on.

The point that you raise re modifications on a per stock basis is something that I have thought about also. True, this is no longer TT in the true sense of the word, though the major principles still apply (particularly the MM, as you identified). In truth, the area that I am interested in is slightly wider than TT and might more correctly be called "trend trading" which is probably itself a subset of "mechanical trading systems". Interestingly, when I read information from others working in these directions (including the original turtles) it seems that they have largely moved in these directions also.

Specifically, I see no problem (other than naming mentioned above) in pursuing variations of many kinds. The advantage that we have now is that we all have super powerfull computers on our desks that enable us to backtest simply and quickly all types of ideas. For example, in addition to your idea of setting different entry and stop criteria it may be worthwhile rejecting entire stocks (or whatever) all together because they are not "trendy" enough.

Yes, the whipsaw possibility is much recognised ... this is the "cost" of the system that I mentioned earlier. Even the original TT system made some attempt to mimimise this through the "dont take trade if the last trade would have been a loser" clause. The expectation of this cost is taken into account in the backtesting and, of course, accounts for the well known large Drawdowns of the system.

Re Fibonacci. I can't deny your experience of the uncanny reliability of these. I am just a bit wary of any "magic" (maybe to my detriment hmmsmiley02.gif ). I wonder if the result is a self fulfilling prophecy - not that that is wrong, if it generates a profitable system.





--------------------
Peace
Fforrest

Try to be as good a person as your dog thinks you are.
 

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forrestgump
post Posted: Dec 18 2003, 12:43 PM
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Fair enough, One Fat Lady,

We all have our own opinions about all sorts of things and are entitled to them.

I guess I would disagree with you about the relative "complexity" of your "system" as compared to TT. To simply state look at a company, research this company, T/A, fundamentals, PE, momentum etc. to me seems a simplification of the amount of work and judgement involved in these tasks. As mentioned previously, I am also rather fond of "value investing" and have an appreciation of the amount of work in performing and continuously monitoring these tasks. Incidentally, I personally have some concerns about the application of stop-losses in this type of scenario. Having done my due diligence (in a Fundamental sense), where would I put my stop-loss? Would it be an arbitrary percentage?, based on chart support levels?, based on my level of confidence in my own FA skills? How do you actually put a metric on it? For me (I emphasise that I am talking about me) I feel that if I have done my FA research correctly then if the market goes against me, that should not change my view (of course I would re-check to see if I missed something). In this instance a stoploss doesnt really make sense - it sort of makes a strange cross bred animal that will often contradict itself.

Throw all those things that you mentioned together and there's complexity!

Now dont get me wrong. The cross breed system may well work. I just like to operate to some rules that I have tested and understand. This, for me, is the beauty of TT - it is simple, clear and understandable (if you put in the work). I don't actually see it as complex - many other TA type systems are far more complex - for example what parameters do you use for each TA type signal. How does one decide that a 21dayEMA is better than a 34dayEMA? Of course you can do some testing to make some decisions but then aren't you doing a similar exercise to that proposed to test the TT system.

One of the questions that most systems don't address is the question of "How much do I put on the trade?". This is a crucial part of TT and can be very clearly calculated. This is the Money Management part of TT. Even for those not interested in TT the study of Money Management alone is worth the effort.

Geez, I go on a bit don't I?

I am not trying to convince you or anyone that TT works, is better than anything else or is even worthwhile doing. What I am interested in doing is finding some companions (and even the occasional protagonist to keep me on my toes) for what I am finding to be an interesting and hopefully rewarding journey. I know that there are many mis-understandings out there about what TT actually is. It is partly for that reason that I am happy to start at the beginning and validate each step along the way.

Finally, may I just add that whilst the Original Turtle System was a single set of rules, it doesnt necessarily have to be that. Using those principles and the Money Management it is quite conceivable to create and test your very own system that works to your own expectations. There is no Holy Grail for the lazy.








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Peace
Fforrest

Try to be as good a person as your dog thinks you are.
 
Oavde
post Posted: Dec 18 2003, 12:10 PM
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Excellent post forrestgump.

I am not recommending the turtles system. If you think about it however, EVERY single big move up MUST be making prices higher than the 20 day highest. EVERY fall must be making lows lower than, say, the lowest in 10 days. The problem is, if a stock is going along in a channel, you could be buying at the highest 20 day and selling at the lowest in 10 days again and again and again - whipsawing.

So you catch every major rise and get out every major fall but you also catch every whipsaw that happens within that range. thumbdown.gif

Ideally you want to change the parameters to match the stock you are trading so that irrelevant whipsaws are avoided - this is NOT the turtle system.

The other good thing about it in fact the single best thing is its money management - dynamic, and stock dependant tolerance levels. I'd recommend that at least, you can use a similar approach with other systems.

one lady sorry if my last post seemed over the top, I was just tired and annoyed someone would make a blanket statement on one of the few GENUINE systems out there without downloading their completely free overview. Also, how on earth anyone trading could not know aboutr the turtle system is beyond me. Yes, there are sham, scam, rubbish systems out there, but there are also a few simple robust systems that simply do work, they are generally slow and not for everyone, but they don't deserve a bad name because of the scams, also they often have good ideas to offer.

If you want some good ideas for going about trading read "Exploding the Myths" if you can follow that guide, you will do well.

If you want some extreme knowledge of systems, read "The Ultimate Trading Guide" it is pricey but breaks down just about every possible system that can be thought up.

I would say your friends are following bad systems, period. Also I would not judge their success vs your success unless you've both been doing what you are doing for a long time, I've seen a lot of people get lucky for a few years then stuff it all on a sudden gap down beyond their stop loss. However, your approach is very reasonable, especially the stop loss, I don't know about that stop profit though. I would definetely recommend you get and read Exploding the Myths, you sound sensible and it will give you a complete overview of all that you mentioned for only $30

Finally, any system that creates a complicated headache is rubbish, the idea of all systems is that they make the complex simple, they are supposed to automate everything, allowing a large amount of money to be spread with risk management over a (usually) wide selection of stocks - if not holding many stocks at one time, then at least looking at a very large number at one time. Remember the original turtles had a lot of money, patience etc... so could afford to do this, most people do not, most small investors have the advantage of being nimble however.

forrest, fibonacci numbers are completely programmable, not likve Gann and elliot waves. Fibon. are uncanny, I am astonished at how well they predict where support and resistance can occur, and then does occur, they are not accurate to the cent but generally they are accurate to within 1-2% or so, then as the price approaches use other techniques to determine whether price will continue or reverse or go flat.



 
one fat lady
post Posted: Dec 18 2003, 11:58 AM
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Hi Guys
this is my opinion only but-
I think you should approach trading/investing with some simple basic rules.
look at a company, research this company, T/A, fundamentals, PE, momentum etc.
set a stop profit
set a stop loss
follow it closely
and sell at your set targets, don't deviate from these targets.

I have friends who all use different systems and they have just as much $$$, loss or profit as myself and they make it so complicated for themselves.

this is what I feel the turtle system is, another complicated headache


 
forrestgump
post Posted: Dec 18 2003, 08:02 AM
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G'day One Fat Lady,

Thanks for your comment. (I think!) At least I now know that somebody is reading this stuff. I was coming close to doing a "tap tap, is this thing on?" post. rolleyes.gif

Anyway, as I said in an earlier post, I am not setting myself up as a Turtle Trading expert, nor am I setting myself up as the defender of Turtle Trading. As it happens, I also have a great interest in "Buffet-like" value investing - something that is often seen as diametrically opposite to TT. I personally believe that there are more than one (or even two) ways to skin a cat. I also do agree with your implication, and Oavdes subsequent response, that there are many fake systems and charlatans out there - most of which can be exposed quite quickly with the minimum of work/research.

Does Turtle Trading work? At this stage the best answer that I can give is that it probably works for some people, in some circumstances and not for others, in other circumstances. If one is to accept that simple precept, then surely the answer may well be to ( a ) work out how to be one of those people for whom it does work, and; ( b ) find out what those circumstances are for which it works. Of course, this is a simplistic view but not necessarily a wrong one (of course it might be, but I have no objection to personally exploring a number of blind alleys untill I find the one that leads to the pot of gold biggrin.gif )

I am trying not to repeat what I have said in other posts. However, my fortes are logical thinking and practical mathematics (and an open mind). This, for me, comes together in a belief of the the KISS (Keep It Simple, Stupid) principal. Having spent a reasonable amount of time looking at various TA systems, I personally find it difficult to build the necessary amount of faith to trade these systems - it would, for me, involve a suspension of belief that I cannot do. Once again, this is is not to say that such systems do or do not work, simply that having put in some work I have personally put them mostly aside. I am human (mostly) however and do still use some of the things that I have learned in this meandering through the swamps. Anyway, I digress ...

Have you downloaded and read the original turtle rules? What I like about them mostly is their simplicity and the fact that they can be quite easily represented mathematically - they do not require a belief in Fibonacci Numbers, Elliot Waves, Gann Stuff or other such slightly esoteric matters. I'm trying to be carefull here because I have absolutely no intention of rubbishing these things - if they work for you then great. As it happens, I love the repeated occurance of Fib numbers in nature - I just personally have a problem in believing that they have any relevance to trading. Bugger, I've digressed again...

Turtle Trading, in it's simple form, is based on the precept that prices trend ie at various times they will start moving in a direction and will continue in that direction for some period of time. The aim of the Turtle Trader is to identify when these trends start, get on for the ride and accept when the trends end and exit. There is a cost associated with this, alluded to by acturtle in his post, primarily the cost of losing on entries to suspected trends that do not eventuate. The aim, therefore, is to develop entry/stoploss formulas that minimise this cost, whilst ensuring that you are "on board" the really profitable trends. At the other end of the story is the exit from the trend once it has finsihed, with most of your paper profits transformed into cold hard cash. biggrin.gif

Once you have these basic concepts burned into your brain, the next step in the journey is to see if you can turn these plans into reality. This leads to some serious backtesting work - but I'll leave a discussion of that for another time.

Finally, Oavde mentioned one of the major (and often misunderstood) issues of Turtle Trading - Drawdowns. This is the result of periods of time where, in the chosen markets, trends do not eventuate and a series of "costs" result in a whittling away of capital. Typical drawdowns of Turtle Traders are between 30% and 50%. There are some mindset issues that this brings up. Once again, deserving of a full discussion at another time in it's own right. Just one final (I promise) point re drawdowns. Once you actually get into the mathematics of Turtle Trading it very quickly becomes obvious that there is a relationship between expected profits and anticipated drawdowns - individual traders can therefore adjust the parameters of their system to a risk/reward (or drawdown/reward) scenario that suits their own circumstances. I should say, by the way, that you cannot totally remove the risk of a full blowout - it can happen (but of course Turtle Traders who understand their system would retreat as soon as their anticipated Drawdown is exceeded).



--------------------
Peace
Fforrest

Try to be as good a person as your dog thinks you are.
 
 


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