Turtle trading strategy
Turtle trading strategy - is a complete trading system. Its rules cover all aspects of trading and leave virtually no room for subjective decision Trader. It has all the components of a complete trading system.
This review is intended to introduce traders to the Turtle trading system and provide them with an alternative to both intraday and long-term analytical systems. In this article we will review the basic rules of the system and give some examples of working with it.
Briefly about the rules of the Turtle trading system
Entering the market
To enter the market, when the price goes one tick outside the high or low limits of the previous 20 days (for visualization purposes, the price channel indicator is used).
- If the price exceeds the 20-day high, then opens a long position in the corresponding financial instrument.
- If the price falls one tick below the 20-day low, then it opens a short position.
- The entry signal is ignored if the last breakout resulted in a profitable trade (see note).
Note: For testing purposes, the last breakout was considered irrespective of whether a real entry into the position occurred during this breakout or whether the breakout was missed because of this rule. This signal was considered to lead to a losing trade if the price after the breakout traveled a distance of two average daily volatilities (indicator ATR with a period of 20) in the opposite direction to the breakout before the profitable 10-day exit occurred.
The direction of the last breakout is irrelevant to this rule. Thus, a "losing long" or "losing short" breakout allows you to enter a position on the next breakout, whether it is "long" or "short". However, in the case where a breakout was missed because the previous one was "profitable", the entry will be made on the 55-day breakout, so as not to miss the big move.
Outputs
Fixing profits too early - This is one of the most common mistakes when trading on trend systems.
Prices never go straight up; you have to let prices go against you if you are going to ride the trend. In an early trend, this can often mean that a 10-30 percent profit can be replaced by a small loss. In a mid-trend 80-100 percent profit can fall 30-40%. The temptation to ease into a position by locking in a profit can be great.
The profit or loss of the whole trade depends on the point of profit fixing.
The exit was when reaching the 10-day low for long positions and the 10-day high for short positions. All units were withdrawn from the market if the price went against the open position by the 10-day break.
Examples of work on the Turtle system
Let's look at several examples of working with the system on historical data. Let's choose the currency pair EUR/USD as a working tool, futures contract on lead and BMW stock. These are very different assets, which proves the profitability of the strategy.
As can be seen in Figure 1, the previous long position on the instrument EUR/USD The position turned out to be unprofitable, which allows us to expect an entry when the price crosses a 20-day high or low. If there is a trend movement, a successful position can cover losses from several losing trades and bring significant profits.
As can be seen in Figure 2, after a loss-making long position on the lead futuresWe opened a short position, which brought us significant profits. The next break-up of the 20-day channel should be missed (see note), but a continuation of the trend is possible, in which case we would enter on the break-down of the 55-day low (dark blue line)
As you can see in Figure 3, the previous entry into the short position was unprofitable, which allowed us to open an opposite position on the next breakout of the 20-day high, which is currently open and profitable. Let's hope that the continuation trend The profit will bring us significant profits, but we should not forget about an active defense of the position with stop orders, which should be moved after the 10-day lows (the blue channel).
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