Learn why the science of Chaos Theory draws a more accurate picture of market action and intention than other approaches and how you can apply this theory to your trading and daily life. This opportunity allows you to gain the benefit of years of experience in two hours while learning Profitunity’s unique “10 second analysis”. You will learn why over 90% of all traders lose money consistently while 50% of all contracts make money on each price change, even though traders rank in the top 10 percent of intelligence of the general population.
Bill believes that most traders lose because they use the wrong logic maps. Linear techniques from classical physics and the most common technical indicators simply don’t make profits in non-linear markets. He discusses which techniques to use (only three to trade the Profitunity technique) and which to avoid. You will learn why the usual axioms (“buy low, sell high” and “follow the trend”) throw you off the profit trail and why concepts such as “bullish/bearish consensus”, “oversold” and “overbought” do not really exist. To continuously trade profitably, you must “stop the lies and listen to the truth.” In trading, your brain is not your friend.
In the second part of this session you will earn unique ways to “boot up” your “twin-hemispheric neck top computer” to get in synch with the market, producing better trading and more relaxation while trading. It may be time to stop optimizing your computer and start optimizing yourself. You will receive trading setups that will automatically show Profitunity signals real time. You will also learn the five words that will guarantee your success in trading the markets
Lesson from Djoni Agus:
- June 10th 2008: STRONG SELL SIGNAL
- March 18th 2009: STRONG BUY SIGNAL, golden cross above the Kumo
- Sept 07th 2009: WEAK SIGNAL, golden cross still above the Kumo
Ichimoku AFL, source: Amibroker AFL Library
Sambil meng-explore reversal signal dari stocks yang hancur di JSX, berikut tips Pak Adit:
Signal reversal ini didasarkan pada aturan-aturan sbb:
1. Candle diluar bollinger Band (20,2)
2. Kondisi Oversold
3. Volume hari sesudahnya lebih tinggi.
Tambahan: Bullish Divergence
Kata Pak Tung Desem, kalo buat judul yang agak unik biar orang penasaran “The Secret” sebenernya adalah “No Secret”, sesuatu jadi “Secret” karena orang belum tahu ilmunya.
Dow Theory memandang volume sebagai salah satu hal yang penting dalam Market Analysis.
Volume dalam hal ini adalah jumlah transaksi dalam suatu periode waktu perdagangan (1 jam, 4 jam, daily, weekly,etc). Volume dapat juga menunjukkan total transaksi lot yang diperdagangkan.
Volume menggambarkan kekuatan tekanan antara supply dan demand pada waktu terjadi pergerakan harga. Pertempuran antara supply dan demand ini menunjukkan adanya kekuatan minat beli dan jual di market.
Volume tidak digunakan untuk memprediksi arah trend, tapi digunakan untuk mengkonfirmasi pergerakan harga. Dow mengatakan bahwa “Volume must confirm the trends”. Selain untuk mengkonfirmasi adanya minat beli/jual yang kuat atau tidak Dow mencoba mengingatkan kepada kita bahwa tanpa didukung adanya volume yang cukup kita tidak harus mempercayai arah gerakan dari market.
Kesimpulan awalnya adalah Volume dapat digunakan untuk mengkonfirmasi arah trends atau dapat digunakan untuk menunjukkan bahwa trend yang terjadi akan berlanjut (continuation) atau akan berakhir (flat,ranging,reversal).
Menurut Dow, volume mengikuti arah dari trend yang terjadi. Ketika terjadi kondisi trend bullish seharusnya diikuti oleh volume yang terus meningkat. Pada saat terjadi koreksi /reversal biasanya ditandai oleh penurunan volume.
Jika pada kondisi trend bullish yang ekstrem terjadi penurunan volume, maka secara tidak langsung mengindikasikan akan terjadi koreksi/reversal trend
Kondisi ini biasa disebut dengan convergence/divergence.
Convergence terjadi ketika pada kondisi trend bullish volume juga meningkat demikian sebaliknya
Sedang divergence terjadi jika pada kondisi trend bearish volume justru mengalami penurunan. Kondisi ini yang harus diwaspadai karena penurunan minat beli (buying pressure) dapat memicu adanya reversal trend
Berikut gambar grafik convergence pada ANTM
Pola divergence pada BUMI (Bandar Play’s):
Source: Aditya Raja Ar Ra’du/Mata Dewa
Larry Williams OOPS System….
I also posting the system definitions….
Please have a look and revert with interpretations
//A first Attempt
//A Second Attempt
shortsetup=Open > Ref(H,-1);
buysetup=Open < Ref(L,-1);
Buy=buysetup AND BuyPrice;
Short=shortsetup AND SellPrice;
This system by Larry Williams..I believe ( was / is ) set up to be a day Trading system…
Here is what I have in the way of the systems definitions.
The OOPS system:
While originally conceived as a day trading system, Larry now prefers to trade it past the end of the day, holding his position sometimes for 2 or 3 days.
To trade OOPS, just watch the open. You will have a potential trade any time a market opens by gapping above the previous day’s high or gapping below the previous day’s low.
- If the open is above the previous day’s high, you have a potential SELL. (… Shortsetup=Open > ref(High,-1)…) .
- If the open is below the previous day’s low, you have a potential BUY. (…Buysetup=Open < ref(Low,-1)…).
What you are looking for is the market to close the Gap. At approximately that point, you enter your position and hold until the close.
The theory of the trade is that the gap is caused by the public being too enthusiastic on the opening and causing a gap that cannot be sustained. When the gap closes, those on the wrong side of the market say, OOPS, and rush to cover their trades. This causes an increase in momentum that lasts for the rest of the day.
There are several issues to consider in trading the system. First is the question of how big the gap should be before a trade becomes attractive. Obviously, the smaller the gap, the less attractive the trade appears and the more difficult it is to execute. Therefore, you should require some minimum size opening gap before you would consider a trade.
Second is the question of exactly where do you enter. Larry recommends entering at the previous day’s extreme, exactly at the point where the gap is closed. …..( ******….I believe my original code logic posted last night was in error here (…
read..(buyprice=valuewhen(buysetup, ref(L,-1)) and
The PROTECTIVE STOP:
Third is the question of a protective stop. Of course, you should always use one. A natural point would be the day’s extreme high at the time you go short or the day’s extreme low at the time you go long. A money management stop to risk a fixed dollar amount would also be appropriate.
A suggestion could be to place a stop below the low of the day at the time of entry for long trades, and above the high of the day at the time of entry for short trades. If this stop is too large, yoiu can substitute a money management stop ( expressed as a dollar amount ) of whatever size is comfortable for you and your account size. If you are not willing to risk at least $ 1000.00, you should probably not trade with this approach without further testing to see if it does work with smaller stops.
Do not attempt to filter the system by trading in the direction of the longer-term trend. This is a concept you will see in most day trading literature. It is an intuitively attractive idea, but research shows the longer term trend has no significant effect on day trading.
An easy way to increase profits is to wait until the next day’s open to exit. By holding overnight research has showed that profitability increased by as much as 50%.
Source: Anthony Faragasso
Jika anda ingin investasi saham baik saham long/medium term yang anda trading-kan (beli, harga naik kemudian jual, kemudian koreksi dan buyback, dst..)…, anda keluar masuk di saham yang sama.
atau anda ingin menjadi short term trader? dengan saham berbeda-beda, lompat sana – lompat sini, seperti kutu loncat.
Motivasi apa yang melatarbelakngi short term trading?
Pivot points are especially useful to shortterm traders who are looking to take advantage of small price movements.
Sebagai gambaran: Harga saham x =3000, saham tersebut harganya bolak-balik 3000-3100, balik ke 3000 – naik lagi ke 3100, turun lagi ke 3000, balik lagi ke 3100 dan close di 3100.
- Bagi swinger yang swing entri dan exit bisa profit 100+100+100=rp.300. Bagi swinger saham x seolah-olah sudah naik dari 3000 ke 3300 (=3000+300) , gain= 10%.
- Bagi pemain Buy and hold tanpa swing: profit = rp.100, kenaikan harga saham “x” 3000 ke 3100, gain=3.3%.
Short term trading tersebut bagaimana strateginya? Saham apa yang bisa di buy/sell dan di harga berapa buy/sell nya?
Strategi yang bisa di ambil:
- Calculate pivot point and support/resistance levels.
- Determine the direction of the daily and weekly trend.
- Set profit objectives and stops.
- Wait 20 to 30 minutes after the market opens for prices to stabilize.
- Enter long positions if the trend is up and price is turning in an upward direction from the pivot.
- Enter short positions if the trend is down and price is turning in a downward direction from the pivot
Selengkapnya silakan anda implementasikan tutorial berikut, tutorial short term trading system klasik yang simple namun powerful, sehingga anda lebih safe dan tentu saja profit.
Untuk memudahkan kalkulasi Pivot Points, jika anda pengguna amibroker silakan menggunakan SUPER PIVOT POINTS.afl sebagai alat bantu penentuan titik-titik pivot, support dan resistannya, afl dapat di download di: http://www.amibroker.com/library/formula.php?id=758
Sebenarnya utk daytrade tidaklah sulit, saya sudah coba mempermudahnya dengan memberikan proyeksi range pergerakan esok harinya, kalau kita sudah membuat proyeksinya maka kita tinggal sabar menunggu apakah support atau resistance yg duluan tersentuh, bila opening langsung menyentuh R3 maka pastikan apakah opening = high, bila demikian maka biasanya pasar akan koreksi bila volume tidak cukup kuat merubah resistance menjadi support, contoh hari ini IDX opening gap up menyentuh R3 seharusnya kita sadar bahwa IDX akan segera turun bila volume tdk cukup kuat, nah ini juga berlaku pada saham2 yang lainnya, banyak sekali hari ini yg masih kejebak juga padahal rumusnya sdh saya share bahkan yang menggunakan software amibroker titik2 proyeksi esok harinya sdh bisa dilihat dengan jelas.
Bagi yang menggunakan Metastock Pak Blin sdh membuat alat bantunya “Supirevier” Jangan bingung2 ikuti saja pasar jangan melawan arah pasar bisa babak belur kita. Bila anda mengincar saham A kemudian openingnya gap up sebaiknya anda bersabar dulu tidak usah buru2 masuk, baca volumenya agar anda bisa enter/exit at the right time. Coba sekali lagi karena kegaglan yg anda buat itu uang sekolah yg nilainya besar sekali. jangan ulangi kesalahan2 yg sdh anda lakukan.
Source: Budi Suryono
Maaf sebelumnya, karena kesibukan, saya baru bisa membalas sekarang. yang bisa saya jelaskan mengenai exit sebagai berikut :
Exit prakteknya adalah 3 X lebih sulit dari entry, lebih rumit, banyak artnya, agak subyektif, perlu banyak2 latihan untuk supaya bisa cepat dan reflek menjalankannya tanpa nyesal apapun hasilnya.
1. Exit kalau loss, batasi loss 5-7% dari buying cost, bila mencapai angka tsb exit cepat, pengalaman saya saham yang turun lebih dari 5% lebih lama baliknya.Exit dulu lebih mudah, perkara balik beli lagi gampang di higher price dan probability sukses pembelian kedua-ke tiga untuk saham yang sama biasanya lebih baik.
2. Kalau sudah running profit di bawah 5 % just let it be, taking profit plan di bawah 5 % dengan risk 5-7% nggak make sense kecuali situasi khusus (seperti general market is very bad)
3. Kalau lolos 5% profit, mulai mikir bagaimana exitnya, idenya adalah bukan sell at TOP, tapi catch easy and big part of the up swing yang bisa dilakukan sbb :
a. Setelah lewat 5 % profit saham akan rally ,make new high every day, hold, sit tight, watch volatility (Volatility yang saya maksud adalah [Highest of the day – Lowest of the day]/Lowest of the day), kalau volatility one day > 10 % siap2 exit:
– kalau closing of the day kira2 deket high, bisa dijual besoknya (ada dua pilihan, kalau masih hijau hold dulu, jual di di siang atau menjelang penutupan, kalau merah jual langsung di paginya)
– kalau closing of the day kira2 setengah antara high- low of the day ,jual hari itu menjelang market closing
b. Atau kalau selama rally nggak ada one day volatility >10%, sell at new low (saya selalu buy on new high kenapa nggak sell di new low?) sebagai trailing stop, tracking every day low sebagai trailing stop, kalau keesokan ketemu new low, jual di harga itu.
Bagaimana kalau setelah kita jual, harga naik lagi? mungkin & sangat mungkin, nggak ada sistem yang perfect, tapi berdasar pengamatan saya risk reward sudah nggak seimbang dan dengan exit kondisi a atau b tsb sudah cukup optimum untuk menangkap short term swing.
Untuk contoh mudahnya kita ambil case BLTA, mohon dibuka chartnya pak, (kalau nggak salah pak Thomas ikutan di BLTA ya?), di 22 Nov’05 cross all time high di 1030 (objectif) setelah form cup (agust-oct) & handlle (oct-nov) (intepretatif/subyektif),
Ingat kita orang bodo, yang selalu buy di highest price (berbeda dengan sebagian besar player adalah orang pintar dengan strategy Buy Low Sell High), buy di highest di level tersebut dan beberapa hari kemudian turun, cut loss 5% di level 970 an dijual ke orang orang pintar yang bid di level tsb.
Again.. BLTA made all time high di 1040 di 27 Des’05, sekali lagi ingat kita orang bodo, always beli di highest dari orang pintar yang saat itu jualan di 1040 dan closing 1060 hari itu. Besoknya turun lagi, cut loss untuk dijual ke orang pintar? Jangan dulu selama triger 5% cut loss belum kena sit tight.
BLTA dalam beberapa hari sideways sampai tanggal 9jan’06 membentuk all time high 1070, sekali lagi ingat kita orang bodo, ada kesempatan kelihatan tambah bodo, yaitu nambah beli di highest dari orang pintar di 1070, besoknya BLTA explode, rally melewati 5% profit, tapi rule point a.=>volatility>10% kena, warning!!, besok saat nya exit (price 1160-1220).
atau jika anda kelewat di kesempatanpun inipun masih ada rule a. New Low terjadi di tanggal 16 Jan 06, dengan trailing stop previous low 1180 sell ke orang pintar langsung di bid 1170. Still not bad Exit Strategy.
Kita lupakan BLTA?… tidak selama UPTREND, BLTA tetap prospek, ada kesempatan untuk menujukkan kebodohan kita.tunggu di new high price…
Again…BLTA make new high di 6 Feb, beli di stupid price 1250, besoknya BLTA Rally, everyday make new high, tanggal 9 feb ‘06 melewati 5% profit, tinggal menentukan kena rule a. atau b., besoknya rally kencang VOL tinggi>10%, kena rule a. Closing dekat high, berarti sell besoknya (price 1500-1570),
Kalaupun ini lewat masih bisa pakai rule b. yang terjadi di Valentine day,1 4 feb, dengan previous low sebagai trailing stop 1500, sell langsung di bid ke orang pintar 1490, still not bad exit strategy.
Kita lupakan lagi BLTA? belum, saya orang bodoh ini akan nunggu di highest pricenya yang saya nggak tahu kapan waktunya, mungkin 3bulan lagi, tiga tahun lagi..
atau mungkin nggak akan pernah beli karena BLTA tidak mampu membuat highestnya, karena BLTA sudah bangkrut.
Untuk back testing, belajar dari real trade yang sudah2, cheek lagi sistem exit berkali2 ini untuk winning stock yang diantaranya pernah saya rekomend yaitu PGAS, ANTM, KLBF, AALI, APOL dll, atau saham yang mungkin yang pak Thomas pernah Explore
So…. saya hanya memberi ide, PRnya tetap di pak Thomas yang saya yakin pasti melakukan modifikasi, Contoh…bagaimana exitnya pakai short term MA? atau
strategy exit setelah kena 90% dari previous highestnya? kalau merasa cocok dengan itu nggak ada salahnya dipakai..
Saya sama sekali nggak keberatan exit strategy di ungkap ke publik secara luas, karena the biggest secret in trading adalah justru nggak ada secretnya.
Mayority player terlampau pintar untuk percaya dengan apa yang saya katakan, mereka akan tetap akan terus melakukan hal yang sama. Behavior Market financial dari
jaman rikiplik, jaman kuda gigit besi begitu-begitu aja.Wall Street never changes,the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.
Selesaikah dengan entry exit kita kuasai? nggak sama sekali nggak… itu hanya menyelesaikan 40% persoalan, persoalan terbesar ada di Money Management dan psikology, dimana jebakannya jauh lebih banyak, yang dengan jujur saya juga masih belajar di area ini, karena orang dengan strategy entry exit persis sama, tapi salah satu menggunakan money management yang baik dan satu nggak, beda hasilnya adalah antara Bumi dan Langit. ini PR saya sendiri yang belum selesai..
Untuk trading tip,(maaf kalau boleh saya tebak, pak Thomas waktu jual selalu kecepetan, baru untung sedikit kabur), kalau nggak tahan profit taking, ya sudah profit taking, tapi sisakan 1lot atau 2lot untuk disiplin mengikuti exit rule diatas. Jaman sekarang sudah ada trading via internet, nggak perlu kontak via phone dengan broker, jadi nggak usah gengsi main saham hanya 1-2 lot.
Yang penting LATIHAN DAN MEMBIASAKAN, bukan masalah P&L yang dibuat dan gunakan KACA MATA KUDA, dalam arti menganut prinsip HEAR NO EVIL, SEE NO EVIL, SPEAK NO EVIL…jangan perhatikan news, jangan baca millis, jangan dengar analys market dari broker, koran, millis dan termasuk dari saya dan jangan bicara posisi anda pada siapapun (Ini yang saya langgar sendiri, tapi saya punya reason tertentu untuk ini).
Sekali lagi ingat kita orang bodo,yang judmentnya gampang terpengaruh dari luar. HANYA KONSENTRASI PADA CHART DAN VOLUME PLUS WATCH THE TAPE/QUOTE DI SCREEN !!!!!.
Don’t antisipate but always respons, when price goes to your triger level, honor it!!, act quickly without hesitate & thinking.
Saya jadi teringat orang yang berumur panjang di Sicilia, pada jaman Mafia merajalela dimana balas dendam & bunuh membunuh sudah turun menurun, ternyata siapa?..
Orang Buta,Tuli dan bisu sekaligus !
Maaf sebelumnya pak Thomas, karena selain pak Thomas, banyak yang nanya masalah ini, penjelasan akan saya CC ke MILIS, mungkin berguna buat yang lain. Kebanyakan nulis lama2 saya bisa beralih profesi. Sekali lagi saya nggak khawatir strategi saya dibaca jelas dan ditiru oleh market player lain, karena sebagian besar pelaku pasar (mungkin lebih 90%) adalah orang pintar yang gak bakalan mau beli di highest dan dari kecil di format/di brain wash untuk selalu bargain, punya kecerdasan&ego, always try to hide their mistake and always try to postpone punishment. Sampai kiamat situasi ini juga nggak akan berubah karena human nature never changes.
Selalu ada kemungkinan mungkin di market ada yang 100% melakukan strategi yang berlawanan, selalu coba buy di bottom dan sell short di highest price dan bisa berhasil, karena ybs orang pintar tahu persis apa yang dicari (setelah minum jamu tolak angin dulu tentunya).
Market demikian luas untuk menampung segala macam style…
Saya hanya orang bodo yang jumlahnya kurang dari 10% dari player, berusaha survive, menerapkan “Reverse Logic” kata si Mbah, counterintuitive strategy dan
have Courage to be minority, selalu mencoba keluar dari kerumunan massa.
Always buy on high, buy on strength, sell on weakness (BOS & SOW, bukan sebaliknya BOW&SOS).. Never try to sell at the top.. Always cut loss short and run.. Hold running profit..
Never average down but always average up… never try to bargain, always hit offer when to buy and hit bid when to sell, ‘cause i’m a broker dreamer.
Mudah2an clear dengan jawaban saya dan membantu pak Thomas dalam selling decision.
Salam semoga sukses and enjoy the game….
Cho Sing Kum
12th Mar 2004
This article was initially written for the March 2004 issue of Chartpoint magazine which unfortunately wound down operation recently and this article was not published. It is now re-edited and produced here.
Check out our Turtle Trading Software, Analyst’s TurtleFarm, that is programmed to the Turtle Rules.
It All Began In 1983
The year was 1983. I had just decided that I wanted to go full-time into technical analysis. I took a sabbatical from work in October to learn on my own, not having gone any where with technical analysis since early1982.
The Singapore representative for Compu-Trac happened to be back in Indonesia so I was helping him out here. It was from this connection that I got to know people at Drexel Burnham Lambert’s Singapore office. They were a bunch of very nice guys and the office was having problem setting up the computer to download data from Commodity Systems, Inc. in the USA.
They were asking me why I did not go to Chicago. They were telling me I should go and handed me a newspaper cutting. You see, about that time, Richard Dennis and Bill Eckhardt had put out advertisement for trainee traders for the Turtles program. I gave it some thought but because I was not in a position to relocate to Chicago, it never crossed my mind to apply. Six months into my sabbatical I was offered a job at Drexel which I took up. Since then I was always curious about the Turtle trading method.
Not A Well Kept Secret
The Turtles were sworn to secrecy. While the Turtle method appeared to be a well kept secret, it was actually not. Channel breakout was growing in popularity in the 1980s. So was volatility adjusted risks. In the late Bruce Babcock Jr’s 1989 book, The Dow Jones-Irwin Guide to Trading Systems, bits and pieces of what could be the Turtle trading methods in one form or another were scattered in the pages. All these were well known market knowledge. But while I was hearing about the successes of the Turtles, I never knew that their method was already out in the market. I was still looking out for it.
The 1923 Book
I finally went to Chicago in 1986. I went not for any Turtle program but for company orientation that took me to New York, Chicago and Tokyo a year after I joined Merrill Lynch Capital Markets. It was something I did during this trip that had a big impact on my learning. I went to the bookshops around the Chicago Board of Trade and bought all the trading books I could carry. Once back home, I ordered more books from Traders Press Inc. by mail order.
Good and often lesser known trading books were hard to come by in Singapore bookshops in the 1980s. I could not remember whether I bought this book in Chicago or from Traders Press. Wherever it was, I was very fortunate to have bought the book, Reminiscences Of A Stock Operator, first published in 1923. It was actually a biography of Jesse Livermore, one of the most respected stock and commodity market speculators of all time.
I was so fascinated by this book that I included many quotes of wisdom from it in the daily market closing commentaries I was writing. I wrote the Nikkei, Hang Seng, Chicago Treasury Bonds and Eurodollar futures closing commentaries. These daily commentaries were sent out by telex to Merrill Lynch’s Asian customers.
Now you may wonder what has this book to do with the Turtle method. In my opinion it has a lot to do although I did not know initially.
Fast forward your clock seventeen years to April 2003.
The Turtles Revealed Their Secrets
That month I was pointed to the website http://www.originalturtles.org. It was a new website wherein the claimed Original Turtles Trading Rules were revealed by Curtis Faith, one of the Turtles in the first class in Dec 1983. Before this I already knew about the 20-day entry and 10-day exit rules which were based on Richard Donchian’s work. I also knew about True Range and Average True Range from J. Willes Wilder Jr’s 1978 book, New Concepts in Technical Trading Systems. And not forgetting Bruce Babcock’s use of Average True Range as stops. What I did not know was how these were put together to form the Turtle Trading Rules.
My Most Important Discovery
And now the most important of my discovery – the combination of these parts resulted in what I would call the actualization of all that Jesse Livermore wrote in his 1923 book into a complete trading system! This was what the Turtle method was to me – a 1983 actualization of a 1923 book. I mean I could relate them. I certainly did not know whether Richard Dennis intended this but I could feel the resemblance, or rather Livermore’s experience, filtering into the Turtle methodology.
So it was that twenty years later, I finally got to learn the Turtle method after all. But Livermore’s experience was already available for eighty years, so what was twenty years. It’s always better to be late then never. Naturally, I gave the Turtle Trading Rules a thorough check out.
The Turtle Trading System
“The Turtle Trading System was a Complete Trading System. Its rules covered every aspect of trading, and left no decisions to the subjective whims of the trader. It had every component of a Complete Trading System.”
This quote is taken from the published “The Original Turtles Trading Rules” at the OriginalTurtles.org website. I agree with this. It is further stated that it covers each of the following decisions required for successful trading:
- Markets – What to buy or sell
- Position Sizing – How much to buy or sell
- Entries – When to buy or sell
- Stops – When to get out of a losing position
- Exits – When to get out of a winning position
- Tactics – How to buy or sell
For this article I will skip components one and six. I will cover the other four. Not that I don’t find them important but choosing the markets to trade is important especially that the Turtle Trading System is a trend-following system and not a for-all-market-types system! Tactics, well you will learn this through experience.
I will also not explain the details of the rules and the mathematics behind the calculation. You can find these in the published rules and are strongly encouraged to download the rules from the website mentioned above. [Edited: The rules in pdf format used to be available for free download but not anymore. The website is also no longer hosted on its own and is now part of a commercial website. A compulsory donation is now required to support that commercial website infrastructure. I feel this goes against the intended objective of the Free Rules Project which has the support of Richard Dennis. Here is quoted from an earlier download of the rules: The Original of the Free Rules Project. This project had its seed in various discussions among a few of the original Turtles, Richard Dennis, and others regarding the sale of the Turtle Trading System rules by a former turtle, and subsequently, on a website by a non-trader. It culminated in this document, which discloses the Original Turtle Trading Rules in their entirety, free of charge.]
The Turtle Rules In TradeStation 2000i
There are two Turtle trading systems which are called System 1 and System 2. I have coded both systems into TradeStation indicators and signals/system. In the examples that follow I will be using these for illustration. There are two features that I have not programmed. They are:
- Pyramid of the 4th unit
- Alternate Whipsaw Stop Strategy
EasyLanguage does not have a feature to retrieve the entry prices of all respective pyramid positions. It only allow for the first entry price of any pyramid entry strategy using the EntryPrice command and the average entry price of all pyramid entries using the AvgEntryPrice command. As such, I have to do backward calculation to derive the subsequent pyramid entry prices.
There are certain entry situations where it is not possible to calculate the entry price of the 3rd unit, for example, when the 2nd and 3rd units were entered on the same day (when using daily historical data for testing). While the entry prices can be assumed using the ½ N pyramid rules, this is never a good practice. Without any reliable method of calculating the entry price of the 3rd unit it is not possible to enter the 4th unit. So I only program the codes to pyramid up to a maximum of 3 units only.
The ½ N Alternate Whipsaw Stop is too small for proper testing on historical daily data.
These aside, the other challenging part is coding the Last Losing Trade Filter. So in the process I programmed four indicators to show the properties of all theoretical trades to guide me. See Fig 1. The four indicators are:
- The first shows the 20-day channels as blue dots. The 2N-stop and 10-day channel exit are red dots. These dots are superimposed on the price chart to give visual representation of all theoretical trades (no pyramid).
- The second shows the unrealized and realized position profit/loss of all theoretical trades based on 1 contract position size.
- The third shows the market position of all theoretical trades.
- The fourth shows the N values from which the N on the day before a position entry is captured and used for the entire duration of the position for calculation of the 2N-stop and ½ N profit.
Fig 1. Turtle’s Indicators
Position Sizing – How much to buy or sell
The position size or unit rather, is based on a concept called N. N is the price distance of one Average True Range of the last 20 days. The Turtle’s calculation differ from the normal method of averaging where you add up the last 20-day and divide this total by 20 to get the average number. Instead the Turtle’s method uses what is commonly called the Wilder’s smoothing method.
Wilder explained in his 1978 New Concepts book that this method of “averaging” saves the amount of work required for manual calculation. Now remember in 1978, personal computers were not common yet. His method of averaging when applied to the Turtle’s N is to multiply the previous day’s N by 19, add to this value today’s True Range and then divide the total by 20.
This method has the advantage that it is somewhat weighted, that is, it changes faster to more recent price behavior yet doesn’t swing as wildly as the normal method of averaging. See Fig 2.
Fig 2. Turtle’s N and ATR
Since the dollar value of N represent 1% of account equity therefore this concept normalized volatility across different market. A market with higher volatility will have a bigger N and dollar value hence smaller position size while low volatility produce a smaller N and dollar value hence a bigger position size. Please refer to the published Turtles rules for detailed explanation if you don’t understand this.
Entries – When to buy or sell
There are two systems. Both are channel breakout systems. System 1 is shorter-term based on a 20-day breakout while System 2 is longer-term based on a 55-day breakout. Very briefly, System 1 would go long on a break above the 20-day high or go short on a break below the 20-day low. System 2 would go long or short on a break of the 55-day high or 55-day low respectively.
In System 1, there is a filter rule which is not applicable in System 2. System 1 will only initiate a position provided the last theoretical trade is a loss. If the last theoretical trade is a winner, then System 1 will only enter when price breaks out of the FailSafe breakout point of 55-day high (for long) or 55-day low (for short) to avoid missing major moves. Let’s take a look at this visually on the March 2004 Soybean Oil chart in Fig 3.
Fig 3. FailSafe Breakout
At point A, System 1 went short on a breakout of the 20-day low. This position was liquated at point B when price breaks above the 10-day high. A few days later at point C, price breaks above the 20-day high. This would have been a long entry but because the last trade was profitable, this trade was therefore not taken. About a month later at point D, price has traded higher to break above the 55-day high. System 1 then went long so as not to miss the bigger move that followed.
Fig 3 shows the system without pyramid so as not to clutter the chart for clarity. The same system is shown again in Fig 4 with the Turtles’ method of pyramiding. The Turtles pyramid to maximum of 4 units at every ½ N profit. Now because of a limitation of TradeStation EasyLanguage where I cannot reliably get the 3rd unit entry price (to allow a 4th unit to be added) so I programmed the trading system to pyramid to a maximum of 3 units.
The Turtles’ method of adding additional units with the stops tightened is very logical. It lowers overall position risks and yet enjoys maximum benefits when it catches good trend moves. However there will be times when this may pose a problem.
Fig 4. Pyramid entries
If you study Fig 3 and Fig 4 carefully, you will notice that there was an extra exit in Nov marked by the label “lxN”. This was followed by a long re-entry in early Dec. Explanation of the Turtles’ stops and exits will make this clearer.
Stops and Exits – When to get out
Like with any well planned trading system, the Turtles’ too have money management stops and normal trade exits.
The money management stops are placed at 2N away from the entry price of the last unit entered. The position risk for a 1 unit position is 2N. Since the 2nd unit pyramid is added when price has moved ½ N in favour, the position risk for a 2 unit position is 3½ N (2N + 1½ N). Similarly, the total position risk for a 3 unit position is 4½ N (2N + 1½ N + 1N). The total risk for a full 4 unit position will then be 5N (2N + 1½ N + 1N + ½ N). Basically the stops for earlier positions are tightened up on pyramiding. Since 1 N represents 1 percent of account equity, therefore the respective risks are 2, 3½ , 4½ and 5 percent.
Now some will have problem with these risk numbers. If you recall in the last year’s July issue of Chartpoint, I wrote that my answer of 5 percent as the risk I would take in a position has caused my chance of a job opportunity with Commodities Corporation. So bear in mind that 5 percent is a very high number. But this is the way the Turtles trade and their high risk appetite may be the reason behind their tremendous record in such short period of time in the 1980s.
Trade exits are 10-days against for System 1 and 20-days against for System 2. This means that for System 1 when price violates the 10-day low, longs are exited, vice versa for shorts. For System 2, use the 20-day against. Therefore in short, System 1 is 20 in, 10 out while System 2 is 55 in, 20 out.
Okay now let’s see what exactly happened in Fig 3 and 4 that resulted in the additional exit and long re-entry. The charts are reproduced in Fig 5.
Fig 5. Tightening of stops when adding units can result in whipsaw.
In the first situation shown on the top chart in Fig 5, the system was run without pyramiding, meaning only 1 unit was entered long on the Friday before 17 Nov. Immediately, the money stop was placed 2N below the entry price. This stop, represented by the red dots, was never hit and was eventually replaced by the 10-day low exit. This 10-day low exit condition was met on 22 Dec and the position exited as shown.
In the second situation shown on the lower chart in Fig 5, the system was run with pyramiding up to 3 units. The first unit was entered as above on Friday 14 Nov. The market then rose in favour of the position and when it hit the ½ N and 1N profits, the 2nd and 3rd units respectively were added according to the Turtles’ pyramid rules. The money stop was tightened (raised) so that it is 2N below the entry price of the 3rd unit. See Fig 5. Unfortunately, the market retraced enough to trigger this 2N stop from the 3rd unit entry price. The entire position of 3 units was stopped out as a result. The long position was re-entered when price broke out of the 20-day high again in Dec and exited as in the first example on 22 Dec.
This is one situation you have to live with when pyramiding. It doesn’t happen all the time but it does happen. Notice that in the example, the market did not retrace to the original 2N-stop calculated from the 1st unit entry price.
How Do You Add Units Or New Positions?
While there are rules on maximum position limits for single market (4 units), closely correlated market (6 units), loosely correlated markets (10 units) and total limits (12 + 12 units), what I feel that is not properly explained in the published Turtle rules but which is very important is whether there are rules pertaining to adding units or new positions when trading a portfolio.
Adding units at every ½ N profits is fine when trading only a single instrument or even 2 instruments. Although the rules did stipulate a maximum of 12 units long and 12 units short for a total of 24 units (obviously this has to be a portfolio), this could translate into a total portfolio risk of 30 percent, assuming 3 long positions of 4 units each and 3 short positions of 4 units each. (Earlier, you have seen how a 4-unit position represents 5 percent risk.) In the event that all this positions turned out wrong, the portfolio will be down by 30 percent!
Is this acceptable? What if this is a new portfolio without any profit cushion? I think you have to use your own techniques since this part of the Turtles’ training was not revealed in the published rules.
Indeed A Complete Trading System, And A Very Good One
The Turtle trading system is indeed a very good complete trading system. But if you want to get some testing done with the presently available technical analysis software, you will be disappointed. All available software can’t test trading system against a stable of instrument but only with single instrument. Nevertheless, the logic is very sound, risk is systematically managed, and the result can be proven.
The Japanese Yen was one of my anchor trading instruments for many years so naturally I was interested in what type of result the Turtle System 1 would produce. The following are two sets of results – Fig 6 is without pyramiding while Fig 7 is with pyramiding. These are hypothetical runs on historical data for the purpose of system testing and evaluation. These are purely computer runs where no actual trades were done.
The tests was based on spot US Dollar/Japan Yen data and did not take into consideration FX swaps which would need to be done to carry spot FX positions overnight and would have effect on the profit and loss performance.
Both hypothetical accounts started with USD 100,000 converted to Yen on the first bar of data. All figures are in Yen.
I am very impressed.
Fig 6. Turtle System 1 without pyramiding.
Fig 7. Turtle System 1 with pyramiding.
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