The following review of “The Complete TurtleTrader” by James Pressley appears on Bloomberg today:
Nov. 21 (Bloomberg) — With the dollar sinking, oil rising and hog futures slumping, this market looks ripe for the Turtles.
I’m not talking about the soda-pop band girls grooved on in the 1960s, “so happy together.” The Turtles I mean are the trend followers trained by trading heavy Richard J. Dennis.
Dennis was the wizard of the Chicago pit in the ’70s and ’80s. By age 37, he had made “hundreds of millions of dollars out of an initial grubstake of a few hundred,” as Michael W. Covel recalls in “The Complete TurtleTrader,” an absorbing inquiry into how Dennis and his partner taught novices to trade.
Dennis maintained that anyone, with the right training, could become a successful trader. His partner, William Eckhardt, disagreed. To settle the debate, they trained apprentices, then handed them $1 million apiece to trade for the firm.
“We are going to grow traders just like they grow turtles in Singapore,” Dennis said after seeing a breeding farm there.
Recruited from classified ads, the Turtles had little in common but smarts. They included a Czechoslovakian-born blackjack master, a fantasy-game designer and an evangelical accountant. A Harvard MBA made the cut, along with a former pianist who had dropped out of med school.
Dennis and Eckhardt put them up in Chicago’s staid Union League Club, with its wood paneling and oriental carpets, and gave them two weeks of training in January 1984. The rules they learned “would have made investors like Warren Buffett cringe,” Covel writes.
Forget about buying low, holding and selling high. The Turtles were taught to buy when a price was rising and to sell when it was falling. This was trading in its purest form.
It mattered not whether they were dealing in soybeans or International Business Machines Corp. All they needed to know about the thing being traded was its current price and usual volatility: If Microsoft Corp. on a typical day bobs between $48 and $52, a Turtle would say its volatility is four.
Beyond that, they needed to track how much money they had after each trade, because they would trade only a set percentage of what was left.
The Turtles entered trades when a market — be it gold, yen or cattle — broke through a recent high or low. They would buy, for example, if the price was the highest in the last 55 days. Then they “pyramided” their trades, adding money to winners until they reached a predetermined exit point.
Because little losses from “false breakouts” could devour capital, Turtles scaled back their bets during losing streaks.
Dennis and Eckhardt resembled “a mass merchandiser who sold 90 percent of their products as loss leaders so they could make a gigantic profit on the remaining 10 percent.”
Though Covel brings the experiment to life, there’s only so much narrative tension to be squeezed from traders sitting at metal desks in a Spartan office, marking charts and making unemotional calculations on loose-leaf paper without even a TV to distract them. If a market wasn’t moving, a Turtle didn’t trade.
Still, Covel excels in explaining how the system works and describing “second-generation” Turtles like Salem Abraham, who built his trading business in rural Texas. Most beat-the-market books aren’t worth my shelf space. This one is.