Sunday, March 24, 2013

A Story of Turtles; History of Trend Following


Richard J. Dennis, a man who made a history in the world of trend following. Many of us use trend following in their investments & trading practice. But most of the people are not aware of this person and his contribution to Trend and Trend analysis.
Richard Dennis


It was the year of 1970’s when a 17 year old student of philosophy Richard J. Dennis; started this career as a floor trader at Chicago Mercantile Exchange. Soon after his education he returned to trading. He borrowed $1,600 from his family, which after spending $1,200 on a seat at the Mid-American Exchange left him $400 in trading capital. In 1970, his trading increased this to $3,000, which he described as "compared to $400 ... a real grubstake", and in 1973 his capital was over $100,000. He made a profit of $500,000 trading soybeans in 1974, and by the end of that year was a millionaire, just short of twenty-six years of age. Today he is well known as a commodity speculator once known as the "Prince of the Pit".

The story of turtles
Dennis believed that successful trading could be taught. So, along with William Eckhardt, a friend and fellow trader, Dennis recruited and trained 21 men and 2 women, in two groups, one from December 1983, and the other from December 1984. In January 1984, after the two-week training period was ended, Dennis gave each of the Turtles a trading account and had them trade the systems they had been taught . During this one-month trading period, they were allowed to trade a maximum of 12 contracts per market. After the trial-period ended, he gave the few of them who had successfully traded the system during the one-month trial, accounts ranging from $250,000 to $2 million of his own money to manage.
An advertisement by Richard Dennis


Selection of Turtles
 Dennis placed an ad in The Wall Street Journal and thousands applied to learn trading at the feet of widely acknowledged masters in the world of commodity trading.
In the selection process he asked basic question like
1.     The big money in trading is made when one can get long at lows after a big downtrend.
2.     It is not helpful to watch every quote in the markets one trades.
3.     Others' opinions of the market are good to follow.
4.     If one has $10,000 to risk, one ought to risk $2,500 on every trade.
5.     On initiation one should know precisely where to liquidate if a loss occurs.

Trading Strategy
Dennis trained this group, known as Turtles, for only two weeks introduction about a simple trend-following system, trading a range of commodities, currencies, and bond markets, buying when prices increased above their recent range, and selling when they fell below their recent range. They were taught to cut position size during losing periods and to pyramid aggressively—up to a third or a half of total exposure, although only 24% of total capital would be exposed at any one time. This type of trading system will generate losses in periods when the market is range-bound, often for months at a time, and profits during large market moves.

In "The Complete TurtleTrader: The Legend, the Lessons, the Results" (2007), author Michael Covel offers some insights into the specific rules:

  • Look at prices rather than relying on information from television or newspaper commentators to make your trading decisions.
  • Have some flexibility in setting the parameters for your buy and sell signals. Test different parameters for different markets to find out what works best from your personal perspective.
  • Plan your exit as you plan your entry. Know when you will take profits and when you will cut losses.
  • Use the average true range (ATR-an indicator) to calculate volatility and use this to vary your position size. Take larger positions in less volatile markets and lessen your exposure to the most volatile markets.
  • Don't ever risk more than 2% of your account on a single trade.
  • If you want to make big returns, you need to get comfortable with large drawdowns.

Outcome of Turtles
The story of how a group of non-traders learned to trade for big profits is one of the great stock market legends. Dennis earned more than $175 million in only five years. He also proved that, beginners can learn to trade successfully. Number of turtles (e.g. Jerry Parker of Chesapeake Capital, Liz Cheval of EMC, Paul Rabar of  Rabar Market Research) began and continued careers as successful commodity trading managers, using techniques similar, but not identical, to the Turtle System.





Tuesday, February 19, 2013

Bajaj Auto Ltd, A Analysis

After a corrective wave from 2223 the stock fell upto 12% causing a bullish divergence. MADC is below 0 line and making the stock more attractive and RSI is showing a strong bullishness. The stock have a potential to go upto 2220. 

Tuesday, January 29, 2013

Will be taking a short leave

As I am having my VTU exams that is going between 11th February to 23rd February due to which I will be away form market. I will be shortly back on 24th  

                          Well be 


Monday, January 21, 2013

Success Story, A Analysis on Rel Cap

On 26th November 2012 I had told this stock will shoot up. And I was right, the stock gave nearly 30% return. Know I find this stock to be at a profit booking stock as we are seeing a bearish divergence.

Strategy: profit booking, can go with a fresh buy if it cross over 520 level.

Look for my previous article on Rel cap(on 26/11/12): Click Here




Tuesday, January 15, 2013

"Haven't I told you?" ITC Reversal

I repeatedly wrote 2 articles regarding ITC Ltd seeing a possible reversal. I gave an exact support when a guy  asked  me a query, on my Blog. The stock was in a corrective phase where I saw a bullish divergence and predicted well before it happened.
  • My article on ITC where I told it will go into a corrective Phase(Date:20/12/2012): Click Here
  • My article on ITC where I spotted a reversal (Date:8/1/2013):Click Here
  • My article on  ITC standing on my support(Date:7/1/2012):Click Here