Richard Dennis was a famous commodities trader who has been credited with developing a highly successful trading system that made him millions of dollars. The system he created is known as the Turtle Trading System, which is still widely used by traders today. In this article, we will explore how Richard Dennis figured out his trading system and what makes it so effective.
Richard Dennis was born in Chicago in 1949 and began trading commodities in the 1970s. He initially started trading soybeans and other agricultural commodities, but eventually expanded his portfolio to include a wide range of assets such as currencies, interest rates, and stock indices. He quickly gained a reputation as a successful trader and became known for his ability to make large profits from small price movements.
In the early 1980s, Richard Dennis decided to test his trading theories by setting up an experiment with a group of novice traders. He believed that anyone could learn to trade successfully if they had a set of rules to follow and the discipline to stick to them. He recruited 13 individuals, whom he called “Turtles,” and taught them his trading system over a two-week period.
The Turtle Trading System is based on a set of rules that are designed to identify trends in the market and take advantage of them. The system uses a combination of technical indicators and price action analysis to determine when to enter and exit trades. The rules are simple and easy to follow, which makes them ideal for novice traders.
The core of the Turtle Trading System is a set of rules for entering and exiting trades. The rules are based on the concept of “breakouts,” which occur when the price of an asset breaks through a key level of support or resistance. When a breakout occurs, the Turtle Trading System enters a trade in the direction of the breakout.
To determine the key levels of support and resistance, the Turtle Trading System uses a combination of technical indicators such as moving averages, Bollinger Bands, and the Relative Strength Index (RSI). These indicators help to identify when the market is trending and when it is range-bound.
Once a trade is entered, the Turtle Trading System uses a set of rules to manage the trade. These rules include using stop-loss orders to limit losses and trailing stops to lock in profits. The system also uses position sizing to limit the risk of each trade to a small percentage of the trader’s account balance.
The Turtle Trading System was highly successful, and the Turtles went on to make millions of dollars using the system. The success of the system can be attributed to several factors. Firstly, the system is based on a set of clear and simple rules that are easy to follow. This makes it ideal for novice traders who may not have the experience or knowledge to develop their own trading systems.
Secondly, the system is based on the concept of trend following, which is a proven strategy for making profits in the markets. By identifying trends and riding them for as long as possible, the Turtle Trading System is able to capture large profits from the market.
Finally, the system is based on strong risk management principles. By limiting the risk of each trade to a small percentage of the trader’s account balance, the system is able to withstand losses and preserve capital. This means that even if a few trades are unsuccessful, the trader can still continue to trade and make profits in the long run.
In conclusion, Richard Dennis figured out his trading system by combining technical indicators and price action analysis to identify trends in the market. He then developed a set of clear and simple rules for entering and exiting trades and managing risk. The system he created, known as the Turtle Trading System, is still widely used by traders today and has been proven to be highly effective in making profits from the markets.
