Description
The Turtle Trading Indicator brings to life one of the most successful and iconic trading strategies of all time. Originating in the early 1980s from a now-famous experiment led by Richard Dennis and William Eckhardt, the Turtle system was built on the belief that anyone could become a profitable trader with a sound, rule-based methodology. The experiment proved this idea to be true: Dennis trained 23 individuals from diverse backgrounds in just two weeks, and most went on to achieve substantial trading success—some earning millions using the rules alone.
At its core, the Turtle system is a trend-following breakout strategy. It relies on buying when prices break above historical highs and selling when they break below historical lows, rather than trying to buy low and sell high. This approach allowed the Turtles to catch extended market moves and stay in them for as long as possible.
Entry Strategy
The Turtles learned two complementary breakout systems:
System One (S1):
- Buy on a 20-day breakout only if the last S1 trade was a loss
- Sell on a 20-day breakdown only if the last S1 trade was a loss
System Two (S2):
- Buy on a 55-day breakout if not currently in the market
- Sell on a 55-day breakdown if not currently in the market
System Two was a safeguard against missing major moves filtered out by System One.
If the trader was on the sidelines due to a profitable S1 trade, S2 would re-enter on the 55-day breakout.
Stop-loss Strategy
- All stops were based on ATR(30) x 2, referred to as two "volatility units"
- This adaptive stop helped manage risk according to current market volatility
- Stops were dynamic and trailed with the position as the trend continued
Pyramiding
To maximize gains from trending markets, the Turtles used aggressive pyramiding:
- Add up to 4 positions per trend
- Each new entry was placed 0.5 ATR above the last one for longs, or below for shorts
- This allowed them to scale into winners without overexposing early
Exit Strategy
The Turtles exited trades on breakouts in the opposite direction, allowing them to ride trends as long as possible.
System One exits:
- Close long positions on a 10-day low
- Close short positions on a 10-day high
System Two exits:
- Close long positions on a 20-day low
- Close short positions on a 20-day high
Money Management
- Initial risk per trade was capped at 2% of account capital
- Pyramiding increased exposure only in profitable trends
- During drawdowns, the Turtles reduced risk. For every 10% drawdown, reduce unit size by 20% Example: A 40% drawdown would result in 80% reduction in position size, and a 20% drawdown would result in 40% reduction in position size.
- This capital protection strategy allowed for quicker recoveries
What to Trade
Dennis emphasized the importance of diversification. Traders should follow a wide range of markets, not just one. The Turtles traded:
- Currencies
- Interest rates
- Global stock indices
- Grains and soft commodities
- Meats, metals, and energy futures
The idea was to always have exposure somewhere when a strong trend emerged.
Input Parameters
- S1 Trade Period: Number of days for breakout entry (default 20)
- S1 Stop Period: Number of days for opposite breakout exit (default 10)
- S2 Trade Period: Number of days for secondary entry (default 55)
- S2 Stop Period: Number of days for secondary exit (default 20)
- Drawing Settings: Customize arrow color and size for long and short signals
- Alerts: Enable or disable visual, sound, push, and email notifications
