Postby razorboy » Thu Dec 11, 2008 2:20 am
Is anyone familiar with the Turtle rules and have any experience with them in Forex? Specifically their entry and exit points?
Entries
The Turtles were given rules for two different but related breakout systems we called
System 1 and System 2. We were given full discretion to allocate as much of our equity
to either system as we wanted. Some of us chose to trade all our equity using System 2,
some chose to use a 50% System 1, 50% System 2 split, while others chose different
mixes.
System 1 ? A shorter-term system based on a 20-day breakout
System 2 ? A simpler long-term system based on a 55-day breakout.
Breakouts
A breakout is defined as the price exceeding the high or low of a particular number of
days. Thus a 20-day breakout would be defined as exceeding the high or low of the
preceding 20 days.
Turtles always traded at the breakout when it was exceeded during the day, and did not
wait until the daily close or the open of the following day. In the case of opening gaps,
the Turtles would enter positions on the open if a market opened through the price of
the breakout.
S ystem 1 Entry - Turtles entered positions when the price exceeded by a single tick the
high or low of the preceding 20 days. If the price exceeded the 20-day high, then the
Turtles would buy one Unit to initiate a long position in the corresponding
commodity. If the price dropped one tick below the low of the last 20-days, the Turtles
would sell one Unit to initiate a short position.
System 1 breakout entry signals would be ignored if the last breakout would have
resulted in a winning trade. NOTE: For the purposes of this test, the last breakout was
considered the last breakout in the particular commodity irrespective of whether or not
that particular breakout was actually taken, or was skipped because of this rule. This
breakout would be considered a losing breakout if the price subsequent to the date of
the breakout moved 2N against the position before a profitable 10-day exit occurred.
The direction of the last breakout was irrelevant to this rule. Thus, a losing long
breakout or a losing short breakout would enable the subsequent new breakout to be
taken as a valid entry, regardless of its direction (long or short).
However, in the event that a System 1 entry breakout was skipped because the
previous trade had been a winner, an entry would be made at the 55-day breakout to
avoid missing major moves. This 55-day breakout was considered the Failsafe
Breakout point.
At any given point, if you were out of the market, there would always be some price
which would trigger a short entry and another different and higher price which would
trigger a long entry. If the last breakout was a loser, then the entry signal would be
closer to the current price (i.e. the 20 day breakout), than if it had been a winner, in
which case the entry signal would likely be farther away, at the 55 day breakout.
System 2 Entry - Entered when the price exceeded by a single tick the high or low of
the preceding 55 days. If the price exceeded the 55 day high, then the Turtles would
buy one Unit to initiate a long position in the corresponding commodity. If the price
dropped one tick below the low of the last 55 days, the Turtles would sell one Unit to
initiate a short position.
All breakouts for System 2 would be taken whether the previous breakout had been a
winner or not.
Turtle Exits
The System 1 exit was a 10 day low for long positions and a 10 day high for short
positions. All the Units in the position would be exited if the price went against the
position for a 10 day breakout.
The System 2 exit was a 20 day low for long positions and a 20 day high for short
positions. All the Units in the position would be exited if the price went against the
position for a 20 day breakout.
I was thinking of setting up the fib lines to use as entry and exit points, but wondered if it is possible to really use a system like this with Forex because the market is trading 24 hours a day - you would have to trade all the time, otherwise you would be skewing the results of the system
Any thoughts?
The turtles themselves said that they had more winners than losers - just that the size of the winners were that much bigger, so I am not too sure that you can apply these rules
PS - these rules were copied directly from a freely available rule book
