Category: Trend Following

As I mention in my book there were two female Turtles. This was news to many as the lone female Turtle for all these years had been positioned as Liz Cheval, but my research showed that to be incorrect. Lucy Wyatt Mattinen was a Turtle as well. And it was other Turtles who were the source of confirming Wyatt Mattinen’s Turtle existence. But like everything with the Turtles there was a more detailed back story!

I state in my book that Cheval elected to not speak for “The Complete TurtleTrader”. She did, however, email me during my book writing process:

Michael,

Thanks for the email and voicemail. I appreciate you contacting me. Could you clarify a couple of things for me? Are you the original founder of the TurtleTrader website? I know it’s changed quite a bit over the years. I think it’s a great resource. Just wasn’t sure if you were the original founder and if so, and do you have any contact information for Russell Sands and other turtles. Rich asked me to put together a list for him and I think you have more up-to-date information than I do. I would appreciate a list of email addresses or other contact information on as many turtles as you have.

Thanks.
Liz

Worse than Cheval saying “no” was not even being able to find Lucy Wyatt Mattinen to ask her for an interview during my book writing process. However, once the book was published I quickly heard from Wyatt Mattinen. She was incensed that she was described as “doing her nails” by another Turtle. In no uncertain terms she educated me about her long time involvement with Rich Dennis and Bill Eckhardt. She laid out her trading successes. Clearly, Wyatt Mattinen, while not an active fund manager today, has lived an interesting life. While she did not agree with the “nails” comment she did state in no uncertain terms that my book was bullseye accurate

However, little did I know I had stirred the pot by declaring that there were two female Turtles. In fact, my article in Trader Monthly revealed the unexpected. Trader Monthly, in verifying my article details with Cheval, was told by Cheval that she was the only female Turtle. Trader Monthly stood by the notion of two female Turtles and referred to “women” in the article.

Why all of the detail? There are quite a few who are interested in the Turtle back story. For example, once my book galleys, the drafts, started making the rounds, feedback from one person in particular struck a chord. Bob Pardo is a seasoned trader. He is also a skeptic, the kind of person you want to read your book in order to understand the weaknesses. Pardo does not believe in praise as much as constant improvement. And, although his bluntness probably rattles many, his honesty was welcomed.

Pardo confronted me with a number of questions postulating why some Turtles were averse to talking and he wondered if there weren’t further lessons to be drawn from Dennis’ managed money efforts. He also saw the apparent paranoia from some Turtles as interesting and worthy of further exploration. So in many ways the back stories I have posted are in response to the likes of Pardo and many others who have asked questions since my book’s release.

More to come.

One of the interesting aspects of the Turtle program was the research completed by four Turtles during the program. They figured out that the rules given to them were too “hot”. Here (PDF) is the memo telling them to cut back.

A few months back I announced my new upcoming book on the Turtles. The book is in the publishing edit process, but it was a conversation I had today that prompted me to write this unusual post.

What happened? I spoke with a trend following trader today. Due to a non-typical career path, he has had a very quiet and successful career over the last twenty years. How successful? He has earned himself a fortune close to $100 million dollars. Frankly, I felt stupid to not have heard of him! In conversation, he suddenly offered a Turtle connection. While he had no association with Dennis or the Turtles in developing his trend trading method (Donchian influences), he did receive advice from a Turtle early in his career about how to setup his trading firm (dealing with legal, etc.). It was the kind of nugget that just continues to make the Turtle story, with all of its tentacles, such a small world story. I KNOW this trader is not the only one with interesting experiences with Turtles over the years.

What does this mean for readers of my blog? Well, the randomness of today’s conversation got me to thinking that I should be asking EVERYONE if they might have a FIRST HAND anecdote or story about the Turtles in some way or another that would be interesting. I am interested in your small bits to big stories. If you do have one, contact me ASAP. There is no guarantee that your story will make it into my Turtle book, but if it is good, now is the time to contact me. DEADLINE? Now.

Michael Gibbons of Gibbons’ Trading LLC provides good insight on “trend”:

“The reality is, most hedge funds make money on the long side of the market. That is, to get and maintain their clientele, they must focus on long only trades. To attract clients, they generally must claim they are fundamentalists, as technical analysis (specifically market timing) is out of favor at the moment. Now trading the long side of the market based on fundamentals (whatever they are), is still premised on the existence of a trend. That is, since the trend is the basis of all profit, the market has to be moving in your direction to make a profit. If you buy at A and sell at B, and the trade was profitable, the market went up-or trended (at least for as long as you were in the trade). Very few people can correctly define trend; I will do that here: it is something that repeats. So funds that trade the long side of the market, still require the existence of a trend to make a profit. Therefore, all those that would deny that they are trend followers are in fact, trend followers. They may not be consciously aware of it, but metaphysically, they are relying on the presence of trends to make money. Their methodologies may not be trend following algorithms, but nonetheless, they are in bed with true trend followers-even if they are not aware of it. The directional movement of a market determines dollar profit. If the S&P 500 goes from 1000 to 1500 and we are long, we make 500 points of profit less fees. The move from 1000 to 1500 was something that repeated-the S&P kept going up. The directional movement was up caused by the presence of a trend. Therefore, any attempt to deny that the trend is the basis of all profit, is a logical contradiction. True trend followers eliminate the rationalizations-they just admit they need trending markets to make money, and act accordingly.”

A good piece of insight recently shared with me from an old pro with 30 years trading experience:

“I guess most readers are familiar on some level with the sport of hunting. I am sometimes amused by the new outdoor channels portrayal of the sport of hunting. Jackie Bushman has a nationally syndicated show from Alabama that weekly portrays the harvesting of trophy bucks. A buck is a male deer for you who are somewhat challenged in the sport of hunting. Almost every week a trophy animal is harvested on the Bushman show. To the novice deer hunting appears to be simple and effortless. Of course what the cameras and most certainly the promoters never reveal is the countless hours of scouting for trophy deer that go into the eventual production of the show. So what’s my point and how does all this relate to trading. Sometimes in trading there just aren’t many trophies to be found – a trophy in the sense being a trending market. These times separate the great traders from the not so great traders. Over my 30 plus year career I have witnessed numerous “times like these”. The good news is that they don’t last forever and my bet is things are about to change. Trend followers have had a pretty tough time lately but tough times don’t last but tough people do. The next question I often receive is “where is the next great trading opportunity?” Not to be a wise ass but if I really knew that I probably would not be sending this to you today. Well I might because this is fun for me and I hope educational for you. I enjoy teaching almost as much as trading. Trust me on this there are some very big trades coming and with hard work and patience you can catch them just like a real trophy deer hunter does.”

Don’t take his last sentence as a prediction, it’s not. He is simply pointing out the reality of trends.

The history of British trend following (PDF).

More on David Harding and Martin Lueck.

Barbara Dixon, a student of famed trend follower Richard Donchian, wrote twenty years ago in Commodities magazine:

Donchian is one of the most respected technicians on Wall Street – especially in commodities. He began his career on 1930 and says he became hooked on markets when read Edwin LeFevre’s fictionalized biography of Jesse Livermore, Reminiscences of a Stock Operator. His interest in technical analysis arose after he suffered some losses following the 1929 crash. This led to his discovery that only the chartists made sense and money. Donchian wrote his first market letter in 1930 at the age of 25, and Shearson’s present ‘Trend Timing’ commodity letter originated in 1960 when Donchian joined Hayden Stone. These letters have served as primers for countless commodity traders. The ‘Twenty Trading Guides’ make a fine supplement to the letters and will probably survive and prove valid for the next 44 years as well.

General Guides

1. Beware of acting immediately on widespread public opinion. Even if correct, if will usually delay the move.
2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.
3. LIMIT LOSSES, ride profits – irrespective of all other rules.
4. Light commitments are advisable when a market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting, and concentration on these moves to the virtual exclusion of others will prevent unprofitable ‘whipsawing.’
5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for one-day reversal.
6. Judicious use of stop orders is valuable aid to profitable trading. Stops may be used to protect profits, to limit losses and to take positions from certain formations such as triangular foci. Stop orders are apt to be more valuable and less treacherous if used in proper relation to the chart formation.
7. In a market in which upswings are likely to equal or exceed downswings, a heavier position should be taken for the upswings for percentage reasons – a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100%.
8. In taking a position, price orders are allowable. In closing a position, use ‘market’ orders.
9. Buy strong acting, strong background commodities and sell weak ones, subject to all other rules.
10. Moves in which rails (now the Transportation Index) lead or participate strongly are usually worth following more than moves in which rails lag.
11. A study of the capitalization of a company, the degree of activity of an issue (a varying factor), and whether an issue is a lethargic truck horse like Consolidated Edison or Exxon or a spirited, volatile race horse like Teledyne (NYSE) or Resorts International (American) is fully as important as a study of statistical reports. (Volatile stocks are 1978 counterparts of two issues mentioned in 1934, Aluminum Co. of America, then on the Curb, and Case Threshing Machine, now J.I. Case, a part of Tenneco.)

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