Turtle Trading System
The Turtle trading system was a rule-based trend-following method taught by Richard Dennis and William Eckhardt to a group of trainees in 1983. It bought breakouts to new multi-week highs, sized positions by volatility and used strict stops.
The Turtle system is a famous rule-based trend-following method from the 1980s. Trainees were taught to buy breakouts, size positions by volatility and always use stops. It shows how a complete trading system can work, and why following rules is hard.
- Category
- Trading Strategies
- Reading time
- 3 min
- Also called
- Turtle trading, Turtle rules, Turtle strategy
- Updated
Turtle trading in plain words
Richard Dennis gave his students — the “turtles” — his own money to trade and a complete rulebook: which markets, how much, when to enter, where to stop and when to exit.1
The method was plain trend-following across commodities, currencies and bonds: buy when price broke above its recent range, sell short when it broke below.2
Stops were mandatory on every trade so no single loss could grow too big.1
How the Turtle rules worked
Choose liquid markets
Trade only highly liquid futures.
Enter on breakouts
Enter on a breakout: System 1 used a 20-day high or low, System 2 a 55-day one.1
Size by volatility
Use Average True Range to set Position Sizing.
Set the stop first
Set stops wider in more volatile markets so normal noise doesn't shake you out.1
Take every signal
Take every signal — skipping one could mean missing the rare big winner that pays for everything else.1
Exit on the opposite break
Exit System 1 longs on a 10-day low and shorts on a 10-day high.2
Worked examples
Example 1 — Big trend
Big winnerA hypothetical market breaks a 20-day high and trends for months.
| Risk | 1R |
| Result | +8R |
Only a few of the many trades turned into big winners, and this was one of them.1
Example 2 — False breakout
WhipsawA hypothetical breakout reverses within days and hits the stop.
| Risk | 1R |
| Result | −1R |
The stop was always in place, so the loss stayed small.1
Example 3 — Skipped signal
MissedA hypothetical trader skips a signal after three losses, and it becomes the year's best trend.
| Signals skipped | 1 |
| Missed gain | +6R |
The rules required taking every signal, because the skipped one might be the big winner.1
System 1 vs System 2
| Aspect | System 1 | System 2 |
|---|---|---|
| Entry | 20-day breakout | 55-day breakout |
| Exit | 10-day opposite break | 20-day opposite break |
| Trade length | Shorter | Longer |
| Signals | More frequent | Less frequent |
Where Turtle ideas are used
Trend following
Classic Trend Following in futures.
Breakout systems
Trading a Breakout from a range.
Volatility sizing
Sizing by Average True Range.
Teaching discipline
Showing why rules beat gut feeling.
Advantages and disadvantages
Advantages
- Fully rule-based and testable.
- Losses are cut early.
- Big trends can pay for many small losses.
- Volatility sizing balances risk.
Disadvantages
- Many small losses in choppy markets.
- Long drawdowns test discipline.
- Breakouts are widely watched today.
- Results from the 1980s may not repeat.
Going deeper
Read as far as you need. Each level builds on the one before it.
What it was
Beginner
The turtles learned a full system that covered market choice, position size, entries, stops, exits and tactics.1
Entries and exits
Intermediate
Entries came on 20- or 55-day breakouts, and System 1 exited on the opposite 10-day extreme.2
Why it is hard
Advanced
The approach meant many trades and few big winners, so traders had to accept long runs of small losses.1
Common mistakes
Skipping signals after losses
The skipped one may be the big winner.
Taking profits too early
Trend systems need big winners.
Ignoring volatility sizing
Risk becomes uneven across markets.
Expecting 1980s results
Markets have changed.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Turtle trading is a classic breakout trend system.
- Entries used 20- or 55-day breakouts.
- Stops were always used.
- Few trades made most of the gains.
- Following every rule is the hard part.
Frequently asked questions
Does turtle trading still work?
What markets did they trade?
Can I trade it with small capital?
Further learning
- Trend Following
The wider approach.
- Breakout
The entry signal.
- Average True Range
How size was set.
- Drawdown
What traders had to endure.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- IG. What is Turtle Trading? Turtle Trading Rules (opens in a new tab) Checked .
- Business Insider. Turtle Trading Rules: Trend Following Investing Based on 20 & 55 Day Highs (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.