Comments on: The Complete Turtle Trader http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/ Trading blog with trading insights, discussion on swing trading, day trading, and trading psychology. Fri, 16 May 2008 10:00:36 +0000 http://wordpress.org/?v=2.0.9 by: TheStockBandit http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-70221 Fri, 02 May 2008 15:18:02 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-70221 TSR, very well-stated, thank you for your comments. Sort of goes back to my previous post: http://www.thestockbandit.net/2008/04/22/good-trades-vs-good-results/ Jeff TSR, very well-stated, thank you for your comments.

Sort of goes back to my previous post:
http://www.thestockbandit.net/2008/04/22/good-trades-vs-good-results/

Jeff

]]> by: Trading System Reviews http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69904 Thu, 01 May 2008 05:15:25 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69904 Just going back to Dave's comment about not predicting the future, I think the difference is that system traders do not determine whether they did the right thing on the outcome, but the process they followed. So they look at the trade and ask themselves if they took the correct position, size of position etc. based on the rules of their system. The idea being that if you do this you will mirror the results of your system. By comparison discretionary traders judge themselves on the outcome of the trade itself rather than whether they followed the rules - ie did it go the way they thought it would. For want of a better analogy, if you think about a casino, the blackjack dealers are not paid to try to beat the players, they are paid to follow the rules of when to take another card, stick etc. The casino knows they have an edge and so employ the dealers to exploit their edge and hence reflect the system traders. However the poker players, while knowing the mathematics behind the odds etc. are making judgement calls as to whether their opponent is weak and can be bluffed off the pot or how much they can get away with betting and still get paid when they hit their flush, which is effectively what discretionary traders are doing. This makes system traders sound very uncreative but disciplined, however you should remember that often the mind that creates the system is often not the one to trade it as they keep making changes on the fly. Covel mentions in the book that Dennis did this frequently and lost some serious amounts at times, it doesn't directly state this was what caused the blow-ups, but the implication is there. They also mention the other flaw in Dennis' execution of the strategy when he started altering the size of the accounts each turtle was trading - which is something like altering the bet sizes for blackjack dealers based on the cards that are coming out! Just going back to Dave’s comment about not predicting the future, I think the difference is that system traders do not determine whether they did the right thing on the outcome, but the process they followed. So they look at the trade and ask themselves if they took the correct position, size of position etc. based on the rules of their system. The idea being that if you do this you will mirror the results of your system. By comparison discretionary traders judge themselves on the outcome of the trade itself rather than whether they followed the rules - ie did it go the way they thought it would.
For want of a better analogy, if you think about a casino, the blackjack dealers are not paid to try to beat the players, they are paid to follow the rules of when to take another card, stick etc. The casino knows they have an edge and so employ the dealers to exploit their edge and hence reflect the system traders. However the poker players, while knowing the mathematics behind the odds etc. are making judgement calls as to whether their opponent is weak and can be bluffed off the pot or how much they can get away with betting and still get paid when they hit their flush, which is effectively what discretionary traders are doing.
This makes system traders sound very uncreative but disciplined, however you should remember that often the mind that creates the system is often not the one to trade it as they keep making changes on the fly. Covel mentions in the book that Dennis did this frequently and lost some serious amounts at times, it doesn’t directly state this was what caused the blow-ups, but the implication is there. They also mention the other flaw in Dennis’ execution of the strategy when he started altering the size of the accounts each turtle was trading - which is something like altering the bet sizes for blackjack dealers based on the cards that are coming out!

]]> by: TheStockBandit http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69789 Wed, 30 Apr 2008 17:20:14 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69789 Hey Dave, thanks for your comments. You bring up some valid points here, but I think the "home run mentality" refers not to ignoring simple rules but rather likely points to position sizing. Courage and conviction have a direct impact on 'how much' one trades, and I got the impression from the book that Richard Dennis wanted traders who were willing to make bold bets while still respecting their rules. That to me boils down to size, not discipline of cutting losing trades when their rules stated to do so. Trade well this week! Jeff Hey Dave, thanks for your comments.

You bring up some valid points here, but I think the “home run mentality” refers not to ignoring simple rules but rather likely points to position sizing. Courage and conviction have a direct impact on ‘how much’ one trades, and I got the impression from the book that Richard Dennis wanted traders who were willing to make bold bets while still respecting their rules. That to me boils down to size, not discipline of cutting losing trades when their rules stated to do so.

Trade well this week!

Jeff

]]> by: Dave http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69590 Wed, 30 Apr 2008 04:27:28 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69590 I read the book. A decent read, although not that enthralling. The turtles seemed like fairly dull people frankly. The real life Trading Places analogy gives the book its life (although the analogy doesn't quite fit when you get down to it. Its not all that shocking that a programmer who works on trading programs actually becomes successful when he is introduced to CTA-style investing). What I havent grasped yet, and this review just reinforces my puzzlement, is if following simple rules without letting emotions throw you off your system is the key to success, than what place does courage and conviction, or a "home run mentality "play in trading success? Those concepts may make for inspiring reading for pro traders or wannabes, but it appears that the real key is a program of risk-management that frankly could be applied to many legitimate investment styles and doesnt necessarily favor trend following. The book is very keen on a principle that the future cant be predicted, and yet traders are encouraged to constantly test new trend following formulas and adapt when current systems don't work in a new environment. So how is that different than some other type of investor back-testing multiple variables that will work better in building a portfolio of investments. Mr. Covel fails by insisting that markets havent changed to the disadvantage of trend followers over the years since there will always be "buy and hold"ers and even traders who "are willing to lose" to victimize in a zero-sum game. Yet he also insists that trend followers have to continually refine models to adapt to new conditions(?). Testing new formulas on historic data to succeed in future trading ? OK, but dont call that predicting what will happen next...shhhh.... this is "trend following." I read the book. A decent read, although not that enthralling. The turtles seemed like fairly dull people frankly. The real life Trading Places analogy gives the book its life (although the analogy doesn’t quite fit when you get down to it. Its not all that shocking that a programmer who works on trading programs actually becomes successful when he is introduced to CTA-style investing). What I havent grasped yet, and this review just reinforces my puzzlement, is if following simple rules without letting emotions throw you off your system is the key to success, than what place does courage and conviction, or a “home run mentality “play in trading success? Those concepts may make for inspiring reading for pro traders or wannabes, but it appears that the real key is a program of risk-management that frankly could be applied to many legitimate investment styles and doesnt necessarily favor trend following. The book is very keen on a principle that the future cant be predicted, and yet traders are encouraged to constantly test new trend following formulas and adapt when current systems don’t work in a new environment. So how is that different than some other type of investor back-testing multiple variables that will work better in building a portfolio of investments. Mr. Covel fails by insisting that markets havent changed to the disadvantage of trend followers over the years since there will always be “buy and hold”ers and even traders who “are willing to lose” to victimize in a zero-sum game. Yet he also insists that trend followers have to continually refine models to adapt to new conditions(?). Testing new formulas on historic data to succeed in future trading ? OK, but dont call that predicting what will happen next…shhhh…. this is “trend following.”

]]> by: TheStockBandit http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69078 Sun, 27 Apr 2008 16:33:10 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-69078 David, I believe you are correct regarding not all turtles being successful. I too was given the impression that not everyone was able to stay in the program. Jeff David, I believe you are correct regarding not all turtles being successful. I too was given the impression that not everyone was able to stay in the program.

Jeff

]]> by: yo http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-68225 Thu, 24 Apr 2008 17:48:03 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-68225 Agree that it's a great book. If you really want to get inta the sideshow about it, there's a thread at elitetrader where covel and curtis faith get into it big time over the things covel wrote about faith, as well as other historical tidbits about the turtles. Really juicy stuff. Agree that it’s a great book.

If you really want to get inta the sideshow about it, there’s a thread at elitetrader where covel and curtis faith get into it big time over the things covel wrote about faith, as well as other historical tidbits about the turtles. Really juicy stuff.

]]> by: David http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-68218 Thu, 24 Apr 2008 17:09:56 +0000 http://www.thestockbandit.net/2008/04/24/the-complete-turtletrader/#comment-68218 I was under the impression that, while the Turtles produced some successful traders, not all of the recruits were succesful. I might have read that in one of Jack Schwager's books, but I might be mistaken. I was under the impression that, while the Turtles produced some successful traders, not all of the recruits were succesful. I might have read that in one of Jack Schwager’s books, but I might be mistaken.

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