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The Shifting Shares View – If you can follow rules, you can learn how to trade

Richard Dennis – or Prince of the Pit – as he was known, had frequent discussions with his partner, William Eckhart, over whether or not anyone could learn to trade. Dennis believed that anybody could learn to trade. He just needed to prove it.

So, that’s exactly what he did.

And, so, the ‘Turtle Traders’ were created.

The experiment was set up and started with an advert in the Wall Street Journal, to sign up for a training program. The name ‘turtles’ was chosen as Dennis recalled visiting turtle farms in Singapore and he believed that he could ‘grow’ traders just as quickly.

Naturally, thousands signed up for the ads – all wishing to learn from the hands of a master. But only 14 traders were selected, perhaps a small sample, but these students would internalise Dennis’ rules and beliefs, and even trade Dennis’ own money.

The traders were taught a very specific set of rules, with which they were encouraged to follow and see the results. The actual rules vary from source-to-source, but what we do know is that the traders were taught a trend-following system, with the belief that “the trend is your friend”.

The traders met up in Chicago and underwent training, and were then funded with accounts between $500,000 to $2,000,000.

They were taught:

  • Which markets to trade in – what to buy and sell
  • How to size up positions – how much to buy and sell
  • Entering a trade – when to buy or sell
  • Covering losses – when to get out of a losing position
  • Exits – when to get out of a winning position

It is my opinion that if a person knows how and why to do all of the above, then they can indeed trade profitably.

On the AIM market, many punters load up on oversized positions, and even on margin, and blow themselves up because they position-sized too large. Many of them also run losing positions, and one common feature of AIM punters is that many of them will be holding positions that are down by at least 50% – which require a move of 100%+ just to get back to breakeven.

As humans we have a tendency to want to be right, and so we are likely to snatch at profits unless we have a clear strategy in place. The lack of a strategy is where most traders fall down – and is something that led to me taking a big bath on my portfolio in the past too.

What were the results?

There are no official results from the experiment, but many sources claim that the experiment was a huge success – with Dennis proving to his partner that anyone indeed can learn to trade.

“I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.”

Richard Dennis – the Prince of the Pit

One former turtle claimed that both groups earned large amounts of money simply by following the rules. Another original turtle trader, Jerry Parker, eventually founded Chesapeake Capital Management.

The takeaway from this article is- if you follow certain rules, you can make a lot of money. The hard work is finding what rules to follow.

By backtesting historical technical analysis data, or identifying hallmarkets and common features of great companies, there are many consistent themes out there in the market already discovered and waiting to be discovered. It’s on us to find them.

You can hear more from Michael by downloading his fantastic free book ‘How to Make Six Figures in Stocks’. This can be downloaded from his website – https://www.shiftingshares.com/

Valuethemarkets.com and Dynamic Investor Relations Ltd are not responsible for the content or accuracy of this article.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

  • Michael Taylor does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
  • Michael Taylor has not been paid to produce this piece by the company or companies mentioned above.
  • Dynamic Investor Relations Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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