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Vid. 003: Turtle Traders

When I first became interested in stock trading, I was overwhelmed with all the factors I had to pay attention to in order to make trading decisions. I thought I had to watch the Fed’s every move, pay attention to OPEC’s every fluctuation, and take note of what Saudi ministers of oil were talking about. But then I learned that all that stuff was largely irrelevant. Enter Turtle Trading.

In this video, you will hear about:

  • What I studied to try to become a good trader and later realized was useless
  • How I found out about Turtle Trading
  • The amazing Turtle Trader story of Jerry Parker
  • Why Turtle Traders are made and not born

Items mentioned in this video:

To hear more about Turtle Trading, subscribe to my podcast! And check out my other website, TurtleTrader.com, which is a comprehensive resource on all things Turtle Trading. Tune in again next week for Video 4.

[toggle Title=”View full transcript”]Today I want to talk about my inspiration into my trend following trading world. It came through a really interesting story – what I refer to as the Turtle Trader story. Which is also the name of my website, turtletrader.com.

In my first video, I talked about the idea of the Zero Interest Rate Policy and Black Swans, and why it makes a lot of sense to have strategy to deal with the idea that the stock markets are going to take another 50% hit at some time. And if you don’t have a plan, you will be there sitting with your pants at your ankles, waiting for the central planners to do something. That doesn’t sound right, but you know what I mean.

In my second video, I talked about the idea of the “Holy Grails” – from CNBC, to Maria Bartiromo, to Warren Buffett, to day trading. – just absolute urban legend nonsense that you should not be paying attention to. Not good stuff. And once again, I’m not calling Warren Buffett an urban legend. I’m saying – look, he’s a great successful investor, and he’s made a ton of money. I just don’t think he’s done it how he says he’s done it.

Speaking of Warren Buffet, a long time ago I was reading Warren Buffett and another guy, Seth Klarman, whose book is Margin of Safety. And I thought, gosh, I’ve got to know about all of these economics – what the Fed is going to do, and all these economic reports, and unemployment, and OPEC, and whether some Saudi minister of oil may be making some declarative statement about something, and balance sheets – this is all the stuff I must know. This is how I’m going to make money – or so I thought.

Until I saw an article by a guy named Jerry Parker. And it was about how he made a lot of money in one year – it was more than 35 million dollars, and he was in his late 30s. And the article said that he was using a trend trading system, and essentially no fundamental information. So all that stuff that I was talking about that I thought I needed to know – the OPEC reports and balance sheets – no no no. He didn’t do any of that. All that Jerry Parker did was that if the price went from 100 to 200 – and I don’t care what market, it doesn’t make a bit of difference – if it went from 100 to 200, he would have captured the majority of that move. Either up or down, because in a lot of cases you can make money on down markets too, from shorting the market. And if you don’t know what shorting is, you’ve got to go to Google.

Parker was a trend following trader, and the cool thing about Parker was how he learned to be a trend following trader – because he learned, he wasn’t just born with it. He was either smart enough, or lucky enough, or he just had good fortune that day, to see this one ad. And this one ad said that there is a very famous man in Chicago that is looking for trainees – trader trainees. And he would teach you his methods and give you some money, and you can become a part of the team. Jerry Parker answered that one ad. And he went, and met Richard Dennis, and he got hired, and so did about 20 other people. This was in the 10980s. They got hired, they got two weeks of training – a specific set of trading rules. And these rules would tell you: “Here is the portfolio that you are going to follow, here are the markets in your portfolio. Here’s when you buy, here’s when you sell, and here’s how much you bet on each trade, based on how much capital you have.”

Jerry Parker learned these rules, these trend following rules from Richard Dennis, and him and the other students were nicknamed the “turtles”. Legend has it that Richard Dennis had been to Singapore, and he saw a turtle breeding farm, and he wanted to grow trader like they grew turtles in this big vat or water. So Jerry Parker, an average guy, learns trend following trading – this is not what Warren Buffett does. And he’s made an absolute fortune.

The best benefit that I can pass along to you today is “Nurture Trumped Nature”. Inborn talent is not where it’s at – anybody can learn to be a trend following trader. Anybody can learn a set of rules. That’s what Jerry Parker proved, that’s what Richard Dennis proved, that’s what the other students, the Turtle Traders, proved.

That inspired me to say, “Gosh, I must learn these rules!” And I have ended up helping a lot of other people understand these rules. And other sets of trend following rules – other sets of trend following education. Because they’re not the only trend following traders out there. John Henry, the man that bought the Boston Red Sox – the man was on the other side of the Queen’s bank, the Barings bank, back in the day. He made all that money and he bought the Boston Red Sox from Barings bank.

Some other specific trend following resources. My podcast, with Jerry Parker, who was the most successful Turtle Trader of them all. My podcast with turtle Mike Shannon – he was definitely a character. Not as successful as Jerry Parker, but lots of lessons to learn.

The last thing I want you to do is to read my book, The Complete Turtle Trader. I want you to understand this story from start to finish. This very human story about nurture trumping nature. Inborn talent is not where it’s at. The idea that you can take average people off the street, give them a set of rules, and watch them make millions upon millions of dollars.

Oh, and by the way, I mentioned that this experiment was in the 1980s. A significant number of these traders still trade for their clients today. So the experiment never ended, we’re talking about 25 plus years. Now if you don’t think that a continuous track record of a certain style of trading, after 25 years, means something – well, I can’t help you there either. [/toggle]

Have a question about Turtle Trading? Ask in the comments or send me an email.

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