Subscribe now and watch my free trend following VIDEO.

Behind the Curtain

I share many items for free on my websites. Unfortunately, there are some items that must remain behind closed doors:

Michael, first of all, thank you for all of your work. I appreciate your conviction and tireless effort. You referenced an Eckhardt audio speech in your podcast episode with Van Tharp. Would you be willing to share the speech with me? I would be very interested to hear the speech from Mr. Eckhardt. Please let me know at your earliest convenience. Keep up the great work!

Thank you,

Unfortunately I can’t share it. Wish I could.

The TurtleTraders Had 5 Questions for Their Trading

The Turtles’ core axioms were the same ones practiced by the great speculators from one hundred years earlier:

“Do not let emotions fluctuate with the up and down of your capital.”
“Be consistent and even-tempered.”
“Judge yourself not by the outcome, but by your process.”
“Know what you are going to do when the market does what it is going to do.”
“Every now and then the impossible can and will happen.”
“Know each day what your plan and your contingencies are for the next day.”
“What can I win and what can I lose? What are probabilities of either happening?”

However, there was precision behind the familiar-sounding euphemisms. From the first day of training, William Eckhardt outlined five questions that were relevant to what he called an optimal trade. The Turtles had to be able to answer these questions at all times:

1. What is the state of the market?
2. What is the volatility of the market?
3. What is the equity being traded?
4. What is the system or the trading orientation?
5. What is the risk aversion of the trader or client?

There was no messing around in Eckhardt’s tone, as he suggested that these were the only things that had any importance.

What is it the state of the market? The state of the market simply means. “What is the price that the market is trading at?” If Microsoft is trading at 40 a share today, then that is the state of that market.

What is the volatility of the market? Eckhardt taught the Turtles that they had to know on a daily basis how much any market goes up and down. If Microsoft on an average trades at 50, but typically bounces up and down on any given day between 48 and 52, then Turtles were taught that the volatility of that market was four. They had their own jargon to describe daily volatilities. They would say that Microsoft had an “N” of four. More volatile markets generally carried more risk.

What is the equity being traded? The Turtles had to know how much money they had at all times, because every rule they would learn adapted to their given account size at that moment.

What is the system or the trading orientation? Eckhardt instructed the Turtles that in advance of the market opening, they had to have their battle plan set for buying and selling. They couldn’t say, “Okay, I’ve got $100,000; I’m going to randomly decide to trade $5,000 of it.” Eckhardt did not want them to wake up and say, “Do I buy if Google hits 500 or do I sell if Google hits 500?” They were taught precise rules that would tell them when to buy or sell any market at any time based on the movement of the price. The Turtles had two systems: System One (S1) and System Two (S2). These systems governed their entries and exits. S1 essentially said you would buy or sell short a market if it made a new twenty-day high or low.

What is the risk aversion of the trader or client? Risk management was not a concept that the Turtles grasped immediately. For example, if they had $10,000 in their account, should they bet all $10,000 on Google stock? No. If Google all of a sudden dropped, they could lose all $10,000 fast. They had to bet a small amount of the $10,000, because they didn’t know whether or not a trade was going to go in their favor. Small betting (for example, 2 percent of $10,000 on initial bets) kept them in the game to play another day, all the while waiting for a big trend.

Note: Excerpt from The Complete TurtleTrder.

Wise Price Trading Words from William Eckhardt

From William Eckhardt:

“An important feature of our approach is that we work almost exclusively with price, past and current. One reason for this is that to make any progress in the early stages of quantitative investigation you usually have to reduce the relevant factors to one or two crucial variables. Price is definitely the variable traders live and die by, so it is the obvious candidate for investigation. The other reason is that in a system that’s making good use of price information, it is very difficult to add other information without degradation. Pure price systems are close enough to the North Pole that any departure tends to bring you farther south.”

Bill Eckhardt trader
The TurtleTrader Bill Eckhardt. Photograph from

More from a conversation never heard on CNBC:

“Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. In contract, random liquidations will kill the best system.”

More from Pricetrader Bill Eckhardt can be found in my 2nd book.

Learn to be a trend following trader.
Sign up free today.