Turtle Trading strategy

Why it works

Big trends are rare but huge. A breakout system accepts many small losses in choppy markets in exchange for catching the few moves that run for weeks or months. Most of the profit of a year usually comes from a handful of trades.

What made the Turtles different was not the entry, which is simple, but the money management: every position risks the same fraction of the account measured in units of volatility, so a quiet market and a wild market carry the same risk.

The rules

Setup

• Calculate N: the 20-day average true range (ATR) of the market.
• System 1 watches the 20-day high and low; System 2 watches the 55-day high and low.
• System 1 skips a breakout if the previous System 1 breakout would have been a winner (the Turtles used this filter; System 2 takes every signal).

Entry

• Buy when price trades one tick above the 20-day high (System 1) or the 55-day high (System 2).
• Sell short when price trades one tick below the 20-day low or the 55-day low.
• Size one unit so that a move of 1 N costs 1% of the account: units = (1% × account) ÷ (N × value per point).

Stop loss

• Initial stop at 2 N from the entry: a full-size loss is about 2% of the account.
• When you add a unit, move the stop of every unit to 2 N from the latest entry.

Exit and management

• Add one unit every time price moves ½ N in your favour, up to 4 units per market.
• System 1 exits on a 10-day low for longs (10-day high for shorts). System 2 exits on a 20-day low (20-day high for shorts).
• Never take profit at a target: the trend decides when you leave.

Filters that improve it

• Trade a diversified basket of uncorrelated markets: one trend in one market can make the year.
• Limit total exposure: the original rules capped units per market, per correlated group and per direction.

Worked example

Illustrative example on gold: the 55-day high is $2,050 and N is $25. With a $50,000 account, 1% is $500, so one unit is the size where $25 is worth $500 (20 ounces). The buy stop sits at $2,050.10 and the initial stop at $2,000 (2 N).

Price rallies to $2,062.50 (½ N): a second unit is added and both stops move to $2,012.50. Two more adds follow at $2,075 and $2,087.50. Weeks later the market closes below the 20-day low at $2,140 and all four units are closed with a large gain, after three previous breakouts that lost 2% each.

Illustrative numbers, not a recommendation.

Common mistakes

• Skipping the signal after a losing streak: the trade you skip is often the big winner.
• Taking profits early at a fixed target, which cuts the right tail that pays for everything.
• Sizing by lots instead of by N, so volatile markets carry far more risk than quiet ones.
• Trading only one market: long flat periods without a trend will make you quit the system.

How to practise it

In Candlemind, open the 4H timeframe, mark the highest high and lowest low of the last 20 candles and only trade a close beyond them. Put the stop 2× ATR away and let the trail decide the exit.

Track three numbers over at least 50 trades: win rate (expect 30–40%), average winner in R (should be well above 2R) and the longest losing streak. If you cannot stomach ten losses in a row, the system is not for you.

Pre-trade checklist

1. Price is breaking the 20 or 55-period high/low
2. Stop at 2× ATR from entry
3. Risk 1% per unit (size from ATR)
4. No fixed target: exit on the opposite 10/20-period break
5. Not skipping the trade after recent losses

Frequently asked questions