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Are You Gambling Everything on a Doomed Forex Trading System! ... Discover The Turtle Trading System and Much More!
Updated Saturday, December 17, 2016, 1:22 P.M.
Dear fellow Advanced Forex Trader,
Don’t get me wrong. I understand why you are trying to program your way through the Forex market.
Before we had automated systems Bruce Kovner made himself and his hedge fund investors rich in Forex. Kovner cued on trader sentiment combined with key support and resistance levels as he explains in the New York Times Bestselling classic book ”Market Wizards” by Jack Schwager.
The book reports that Kovner made over $300 million for himself and his hedge fund way back in 1987 alone. And that “Two thousand dollars invested with Kovner in early 1987 would have been worth over $1,000,000 ten years later.”
Kovner explains in his interview with Schwager that he tries to know everything about the market to get an edge. He employed human personal assistants who watched market monitors 24 hours for breakouts into new lows or highs.
Bruce Kovner further explains that parts of technical analysis such as chart analysis are where it is at.
“Technical analysis tracks the past; it does not predict the future. You have to use your own intelligence to draw conclusion about what the past activity of some traders may say about the activity of other traders.”
Is This You?
Your problem is that you are poorly trained by somebody who has attended enough Forex trading conferences to sound sufficiently credible to lure you in. You have been trading programs written by these other people as canned robots.
And when you put their robots into play all heck blows up.
This Udemy training teaches you the same Harvard studied scientific approach Bruce Kovner learned.
I am Dr. Scott Brown. I am a professor at a major state university.
I hold a Ph.D. in finance from the University of South Carolina. And I have obtained a master’s degree in international management from Thunderbird in Forex trading and international financial management.
Thunderbird is routinely #1 ranked by the U.S. News and World Report. And I have decades of actual money-on-the-line trading experience.
Among the many benefits of completing this training you will start from the big picture and work through each scenario.
Once you have your carefully planned Forex trading system thought out you will discover how easy it is convert it into an automated self-learning robot.
Your robot can trade the Forex market when you are away from your screen.
This Forex trading robot will trade for you whilst you sleep. And it will cover your back when you are out of your office.
“I contacted Dr. Brown through email and learned he was teaching an online course that would help steer me in the right direction. He talked about using stop losses, money management, timing and fundamentals. I had never before paid any attention to these things. I just want you to know Dr. Brown things have really turned around for me and it’s all about knowing the right people and having the right tools. Thank you so very much.” - Charlie White 6/1/2015
Enroll now for lifetime membership in this organically growing course that evolves and adapts to your learning needs over time!
You enjoy a 30-day money back, no questions asked guarantee fulfilled by third party Udemy staff.
How much is every ticking second forward in your life worth? Every day that passes is a missed opportunity to learn from our crack Ninja squad of Forex trading trainers: Lan, Carlos and me.
We are waiting inside to train you in proper robotic forex trading procedures. Truly yours,
Dr. Scott Brown
P.S. WARNING: Your education is a precious commodity. Don’t squander this opportunity. Enroll now!
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|Section 1: Carlos Vila & Dr. Scott Brown Welcome You to Our Futures Community!|
Dr. Scott Brown holds a Ph.D. in finance from the University of Puerto Rico. He trades Forex daily with real money live in front of a Udemy audience.
Carlos survived the hardest and most mathematical of all engineering programs at the Massachusetts Institute of Technology. Then he completed an MBA in finance with us at the University of Puerto Rico. Mr. Vlia has extensive experience robot trading the Forex markets.
|Quiz 1||2 questions|
This tests your knowledge of getting the most out of this course.
|Section 2: What Works in Technical Analysis Based on Actual Empirical Studies in Forex Now!|
This section focuses on behavioral finance and technical analysis. Objectives are as follows,
In economics and finance we assume that humans,
There is no reason for us to suspect that the marginal investor does not act this way.
Psychologists Kahneman and Tversky won the Nobel prize in Economics with claims that humans do not behave rationally at the margin. Professor Glen Harrison redid their study with meaningful payoffs and undid their results. Hence you should always assume that humans do act rationally at the margin. The marginal investor is likely a cold and calculated hedge fund manager.
Professor Bob Shiller won the Nobel prize in economics pointing out that cascades are common in nature. He postulated transaction cascades as the source of
He points out that there are a number of scenarios under which investors were acting rationally at the top of the market.
Heuristics are important to consider when modeling investor behavior. These are methods for solving problems based on experience. Investor heuristics are knee-jerk reactions to common yet complex market scenarios.
Stereotypes also drive investor reactions. They will react to common prior market situations that they are familiar with. This is called representativeness.
Investors also remember recent events. If the stock market has tanked in the last few years, investor attitudes tend towards bearishness. This is called availability. It is holographic and exists in everyone’s thinking.
You have to fight it as an investor.
Adjustment and anchoring is psychology where the investor’s first impressions do not shift sufficiently with new information. The post earnings announcement drift phenomenon is reflective of this.
In 1948 Milton Friedman published an important paper comparing the willingness to take a risk of an investor who is completely wiped out and penniless as compared to one who has hit the jackpot. The result is what you would expect. An investor who has nothing to lose is far more willing to take on risk.
This utility function was utilized by Kahneman and Tversky who interpreted results incorrectly. They do not tie risk seeking behavior to investor wealth.
But they do show that investors will tend toward certain outcomes.
Kahneman and Tversky asked questions of students in experimental psychology studies that led to their winning the Nobel prize in economics. An example is as follows. Would you choose (a) $350 for sure prize or (b) fifty-fifty shot of $800. The expected value of (b) is $400. This is $50 higher than the sure shot (a).
The majority of students picked (a).
Glenn Harrison redid the study and showed that when payoffs were made relevant to existing wealth that the majority of students picked (b). So don’t be led down the path into blindly believing in the certainty effect.
Overreaction is the tendency of investors to buy or sell excessively in response to good or bad news. This creates a winner and loser effect where current bad performers outperform good investments in reversal patterns.
This gives rise to arbitrage strategies.
Mental accounting is an undue focus on the performance of one trading account or trade. This is related to the Friedman-Savage utility theory.
Momentum investing takes advantage of research that shows that investors favor rising stocks. This pushes them up over time.
Momentum is related to research findings of herding in the market. Investors tend to copy one another’s strategies. This is particularly so among institutional fund managers.
Technical analysis focuses on price and volume. Price is used in research to identify momentum.
Volume is related to liquidity.
Technical analysis focuses on price and volume charts graphing market data and time. Trend and stop order risk analysis is done devoid of fundamental considerations and is used to time the market. Fundamental analysis is done later.
These are the core tenants of technical analysis:
Anticipating market moves is the bread and butter of the profitable chartist. Ultimately the only way is to buy low and sell high.
Charting started with Dow Theory in the 1890s by Charles Dow. This theory gave warning of the great crash into the depression in 1929.
There are three parts to Dow Theory. First are daily fluctuations that act as background noise. Then secondary movements occur over time frames of a couple of weeks to a month. Finally, the primary trend is seen as a long term move for more than one month. The primary trend can be bullish or bearish.
[CHART] The graph of price and time in this chart shows an uptrend that is clearly visible despite two strong reactions. Reactions are secondary movements against the prevailing trend. The uptrend is bullish and confirms as consecutive new market highs are formed. The major trend is over when it breaks below the extreme of the prior secondary reaction.
Here is the anatomy of the death of the primary trend when bullish. Market recovery following a reaction does not make new highs. The market reacts to attain and form a new low. Subsequent oscillations operate from new lows.
Notice how Dow Theory depends on noticing new market highs and lows. These highs and lows tend to form at visible price levels.
These price barriers are categorized as support when at the lower end of a trading range. Resistance levels form at the upper range of trading consolidations.
Studies show that when the exchange rate breaks through support or resistance that the market tends to continue with short term momentum. This effect is both statistically and economically significant in academic research of forex.
When the market breaks through support or resistance it is called a breakout. These are associated with high volatility and momentum in scientific research.
Breakouts are associated with both momentum and reversal swing trading.
This graph shows what support looks like on a price chart.
This chart shows you what resistance looks like. The idea behind support is that a low enough price will bring in demand that acts a lower barrier supporting the market. The notion behind resistance is that a high enough price brings in sellers forming an upper barrier that resists price increases.
A breakout implies that Mr. Market has decided that the asset is worth more [or less] than the current trading range.
Many scientific studies in academic economics and finance have confirmed the importance of trading volume in forecasting asset prices.
An exchange rate making a new high on heavy trading is bullish.
An exchange rate making a new low on heavy trading is bearish.
New extremes in exchange rates on moderate or low volume is indefinite.
This chart shows the low and the high price of an investment asset in a specific month. Further it shows that the price traded between a high and a low then closed at specific levels throughout any day on the chart.
Market indexes can be plotted as average price levels over time. This chart shows the Dow Jones Industrial Averages (DJIA).
There are a number of important visual formations you should be able to recognize at a glance. Here is a list of bottom price patterns,
This pattern looks a lot like a head and shoulders forming.
This graph gives you a closer look at each of the patterns mentioned before.
And here are the rest.
Point and figure charts strip time from charting. These chartists look for reversals on point and figure charts for support, resistance, breakouts, and congestion.
But these are old school. Use range bars in the TnT Autopilot to strip time out of your charts.
You can't use point and figure to trade but you can tap the same concept using range bars. Let me explain.
This point and figure chart shows that the stock goes to thirty then forty-two and finally slumps to thirty-six. This is the kind of pattern taught.
This is just mishmash. Point and figure charts are meaningless. In fact, the most powerful of all to watch is the simple price trend and trading volume.
There are a number of other technical indicators that are used to forecast trend. These are categorized as
Contrarian [dumb money] indicators are derived from,
Odd-Lots are trades are less than 100 shares of stock. The idea is to do the opposite of the dumb money little guy buying the odd lots. Barron’s gives your odd-lot trading reports.
The indicator is a simple ratio of odd-lot to full size purchases. This indicator only works in equities.
But the Commitment of Traders gives us the small speculator in currency futures. The small speculator is equivalent to the odd-lot stock investor.
The commitment of trader indicator [COT] is a ratio of small [dumb money] speculators too large [smart money] speculators and hedgers.
This chart shows how the odd-lot small retail stock investor is right with the market rise but buys more aggressively into the drop.
This is the same relationship we are looking for with the commitment of traders in Forex futures.
The small retail investor is assumed to sell heavily before the bottom of an extended down-trending bear market. This is thought to be heavy in particular on Monday after stewing about losses over the weekend.
Short sales volume is studied extensively in equities. It is equally valid in Forex.
Market drops by short sellers in equities is the same as in currencies. With stocks the short seller has to eventually purchase the shares initially sold.
And these levels of short selling are reported on the NYSE website.
The same goes for short sellers of Forex, futures, and futures option contracts. These have to be purchased down the line by short sellers.
This is part of the pronounced oscillations we find pervasive throughout price data.
Extreme short selling by dumb money is thought to be a bullish sign.
We pay a lot of attention to ranges that our indicators normally channel through. Imagine that a standard range for an indicator is two to three.
A ratio of two and a half is the mid-point of the normal range. If it rises above three this is bullish.
The commitment of traders is interpreted within a range as well.
Investors Intelligence offers a Bearish Investor Newsletter Sentiment indicator. Disregard it.
Studies show that this is no more useful than tracking mutual fund returns.
Barron’s lists a number of sentiment indicators that allow you to rank markets as bullish or bearish. The Consensus Index measures bullish sentiment as does the Market Vane.
The AAll Index measures bullish, bearish, and neutral sentiment. The FC Market Sentiment gives an indicator level.
The put to call ratio is useful to watch. The ratio of bearish put to bullish call options is usually about 60%.
This ratio works great on currency ETFs.
There are normally fewer [dumb money] put than [smart money] call buyers. The interpretation of the aggregate equity put and call position is to expect reversal when the ratio rises above 65 to 70 percent.
This gives you guidelines to study the 5 most important put to call ratios on currency ETFs,
The aggregate stock market value is reported by Barron’s as the put call ratio. And it has been a good indicator of future stock market trend.
Momentum is a stronger factor in the data than contrarian value for single stocks. So the interpretation is the opposite that of the aggregate.
I have found that it is best to avoid taking a position in individual stocks with high put to call ratios. Look for stocks that have very low put to call ratios as well as other strong technical and fundamental factors.
I have not studied the put to call ratios on currency ETFs. That is an interesting extension.
But I am not sure what the interpretation should be for high versus low put to call ratio of ETF currency options.
The volatility index of Vanderbilt finance professor Robert Whaley measures the expected returns of the S&P 500 30 days forward. This is done by measuring the implied volatility on SPX in and out of the money puts and calls.
Index numbers above 37 for multiple weeks have been associated with major market crashes. A VIX reading of thirty-seven indicates that professional money managers expect a 37% fluctuation in the next 30 days.
This is the most powerful stock index reversal and momentum indicator on earth. Recent research at the top of finance shows that liquidity dries up in the currency market when VIX levels rise.
The VIX has been shown to be very predictive in many studies of future decreases in liquidity and asset price. Expect more reversals in your Forex trading when the VIX is very high.
The SentimenTrader Smart Money and Dumb Money indicator is interesting. Dumb money is the reversal seeking contrarians. Smart money is the momentum seeking continuation investors in bonds. Bond buyers are thought to pick up trends faster than stock investors.
The Barron’s smart money confidence index is calculated by dividing the corporate yield of ten high quality bonds by that of forty mid-grade bonds. This value is then multiplied by one hundred.
The smart money confidence index is published by Barron’s on a weekly basis in the “bonds” section.
Index values are below one hundred since high grade yields are always above those of mid-grade corporate bonds. Smart Money Confidence Index values usually fall between 80 and 96. When the future of the economy is rosy to bond investors they could care less about buying top versus middle grade corporate bonds.
Then the Smart Money Confidence Index spikes into the mid to high nineties.
Let’s say that the average yield on ten high grade bonds is eight point four percent. That of forty mid-grade bonds is nine point one percent. In this case the level of the Barron’s confidence index is calculated as eight point four divided by nine point one times 1000. This is ninety-two percent.
Imagine that the VIX rises.
As bond investors become scared about the future of the stock market bond portfolios become more concentrated on higher grade bonds. This drives up the yield more on mid-grade bonds as demand shrivels.
Here Barron’s Confidence Index drops to eight point nine percent divided by ten point seven percent times one hundred or eighty-three percent.
Actual changes in the Smart Money Confidence Index take months to unfold in the stock market. The Confidence index has a spotty record at predicting the stock market because supply of new corporate issues also influence yield as much as sentiment.
This is another warning to be cautious when adding interest rate variables to your robotic forex program trading.
My experience has been similar with the COT. So use caution when looking at sentiment in the currency futures market with the Commitment of Traders.
Another interesting sentiment indicator based on smart money is the Specialist Short-Sell Ratio. NYSE specialists control the order flow of stock.
The Specialist Short Sale Ratio is normally forty-five percent. Above fifty percent is bearish. Below forty percent is bullish. This graphic shows that on January 22nd of 2016 That specialist short sales were 12,460,026 round lots of 100 share units. Non-specialist short sales were 1,064,255,915 round lots.
The specialist short sale ratio was a very bullish 1.2% on this date.
Here is an idea I want to apply to Forex when I get the time. It comes from the notion of market breadth in stocks.
The advance-decline line shows which stock prices are rising as compared to those declining. This is done relative to a market average. The advance-decline level is a simple count of stocks that rose or fell.
If the magnitude of the average advance is higher than that of declines the index will rise. But if the advance-decline line breaks into a hard down-trend the index is usually drug down.
When the index is up-trending but the advance-decline line down-trends, the market may be about to drop.
And an index could be created for the seven Forex majors. An advance decline count would be simple.
This table shows how market breadth is estimated using the Dow Jones Industrial Average and a broad index such as the NYSE, NASDAQ, and AMEX 3,700 core stocks.
When the index is down-trending but the advance-decline line uptrends, the market may be about to recover. The Wall Street Journal reports stock market breadth data.
Mutual Fund Cash is a direct measure of the buying propensity of big Wall Street money managers. The norm is five to ten percent of total fund assets.
High cash positions can help trigger market upturns. Data problems are extensive with this approach. This is an example of a good idea that can’t be done due to data problems.
|Quiz 2||10 questions|
This quiz tests your knowledge of behavioral finance and technical analysis used to write robot trading programs in Forex.
|Section 3: How to Trade the Forex International Currency Market in your Sleep on Auto-Pilot|
The TnT Autopilot allows you to plan out all possible contingencies of possible price movements. As you think through each scenario in sensitivity analysis you can then program the TnT autopilot.
Never allow a robot to pick your pair to trade!
Work out the most likely pair signalling a move. Then set your snare and escape hatch with the TnT Autopilot.
Carlos Vila also studied programming at MIT. This really shows through as he walks you through the TnT Autopilot by Gecko Software.
Recent top level research has shown that the 10 day moving average is the biggest money maker. Carlos shows you how to program a simple 10 day moving average.
Then he shows you how to program a longer moving average to use as a cross-over benchmark.
Bootstrapping is a form of Monte Carlo simulation. This statistical method allows the TnT Autopilot to determine the historical optimal combination of entry and exit signals for a trade and campaign on any major or cross-pair in Forex.
This means that the TnT Autopilot is a self-learning robot. And you can do this in simulation with none of your hard earned savings at risk.
We recommend that traders start learning in simulation. This is no different than pilots.
Lan and Denice Turner are licensed pilots.
As with any curve fitting technique we caution traders to start with very small amounts of real cash at risk when switching from simulated to live cash trading. Historical fitted indicators do not always generate the same return distribution in real cash trading as compared to simulation.
The Track n' Trade Autopilot is a fully programmable intuitive platform. It allows you to create a robotic assistant that manages your positions while you are out of the office or asleep.
Lan Turner and his team of programmers have created the most flexible and easy to use automated Forex trading platform on Earth today.
What Ever Happened to the Turtle Traders?
The Turtle Trading System is legendary. A leak recently revealed its hidden potential. This simple trading system is ideal for programming into the Gecko Software Track N’ Trade Live Futures or Forex platform.
Richard Dennis stood in front of their first group of inductees. The motley crew of eclectic trainees were about to mind meld with the most powerful entrepreneurial futures trader in the world.
At the age of 37 Dennis had materialized futures trading gains in the hundreds of millions from a few hundred dollars “betting his left nut.”
This new program was called Turtle Trading.
Dennis got the idea in Singapore watching turtles grown in vats. He believed that he could transfer his abilities into a group of traders to clone his daily efforts to expand his potential gain through a trading team.
The first 14 traders in the program were then given $1,000,000 each to trade. Dennis took a large cut of any gain.
Two well-known futures traders decided to experiment shortly after the release of the hit Hollywood movie “Trading Places” starring Dan Aykroyd, Eddie Murphy, and Jamie Lee Curtis. Eddie Murphy portrays a shady pan handler living on the street. Dan Aykroyd plays an entitled man from a privileged family with an ivy league degree.
Jamie Lee Curtis is a mistress who falls in love with Aykroyd after taking him in off the streets. He is left homeless from a bet by his bosses as to whether successful trading arises from nurture or nature.
One boss believes that good trading cannot be taught. Ability comes from genetics.
Great traders are born with the right genetics.
Another boss believed that great futures traders could be trained. Anybody could do it with sufficient desire and at least normal intelligence.
In this paradigm, great traders are forged from their environment. Richard Dennis used the popularity of the movie Trading Places to recruit a team of people with skill sets that gave them high potential but were blank slates. They knew little or nothing beforehand about trading futures — or Forex.
The results of the initial two-week Turtle training and months of personal supervision of implementation by Dennis himself proved that trading skill is transferable. But some individuals have more aptitude than others.
Going to Pit!
Richard Dennis picked up a summer job with the Chicago Mercantile Exchange. He was 17.
It was 1966.
He suspected from the sidelines that he could succeed. But, the exchange would not let anybody into the rough and tumble pit. He talked his dad into trading while standing inside the octagonal futures trading pit with steps leading into the bottom.
Dennis guided his father with hand signals from outside the top rail. They earned some money.
The young man wisely decided to pursue a college degree in philosophy from DePaul University. Philosophy is the basis for much of mathematics. Logic is a good example of an area that dovetails into math. Another area is scientific method developed by Englishman David Hume and John Locke in the 17 and 18 centuries.
This steeped Richard Dennis in empirical reasoning.
He started graduate study at Tulane University but soon left the program to trade futures full time. This was a wise decision.
At the age of 24 Richard Dennis earned his first million dollars. It was the beginning of 1973.
He did this by focusing less on fundamental analysis and more on emotional control. While other traders focused on crop reports he read Psychology Today. He writes, “I think it is far more important to know what Freud thinks about death wishes than what Milton Friedman thinks about deficit spending.”
Dennis is known for his calm and forgiving demeaner. He is a humble Irish-Catholic lad from a middle-lower class South Chicago family.
He started with almost nothing. This helped him ride through the ups and downs at the beginning as he learned “You have to have mentally gone through the process of failure.”
Richard hit it off well with William Eckhardt who went ABD after four years of doctoral study in mathematical logic at the prestigious University of Chicago. They became partners in the Turtle Trading Project.
21 Men and 2 Women
Bill Eckhardt brought simple mathematical reason to the trading scene. He knew that tapping into momentum is a big factor in succeeding in the futures market from his doctoral studies at the University of Chicago — #1 ranked in economics.
This is also the simplest way to trade.
Buy markets rising into new highs. Sell those falling into new lows.
Nothing could be simpler. Today the existence of momentum is a proven fact.
Read Asness, C. Moskowitz, T. and L. Pedersen. 2013. Value and Momentum Everywhere. Journal of Finance 68 (3). 929–985.
Swing trading through reversals has also been shown to beat the market. But not nearly as much as momentum does.
The Turtle Traders utilized a system of technical rules. They performed no fundamental analysis.
Rules fit into six classes:
Some of the rules in these classes were rigid — not to be broken. In other cases, the traders could mold the rules to experiment with the objective of increasing returns from the same or less risk.
This involved deciding which markets to trade. The turtle traders constantly watched 21 futures markets for entry signals.
According to the free downloadable document by original turtle trader Curtis Faith entitled “The Original Turtle Trading Rules” this included 2 interest rate futures markets trading across the Chicago Board of Trade (CBOT), four softs on the New York Coffee, Cocoa and Sugar exchange, nine currency futures contracts, indexes, and interest rate contracts on the Chicago Mercantile Exchange (CME), three precious metal markets trading on the Comex, and three energy futures markets today across the New York Mercantile Exchange (NYMEX).
Turtle traders endeavored to trade enough markets to ensure that a good trend would be found each year. They restricted the number of markets to those that were not thinly traded and thus liquid. Turtles were also careful not to trade correlated markets that would give the illusion of lower than actual risk. Price impact helped. This is a confluence of events where high volume is associated with fast increases or decreases that have been shown to persist over time.
Read Amihud Y. 2002. Illiquidity and stock returns: cross-section and time-series effects. Journal of Financial Markets 5(1). 31-56.
Turtles entered the market on a fast 20-day or a slow 55-day breakout into new highs or lows on the same day it occurred — or immediately if the price gapped over the breakout on open. Scaling was done at every half increment increase in the 20-day moving average of the true range.
The most important rule of all was that turtle traders were to be consistent in taking entry signals. Only a few signals in a year will generate massive gains.
The decision to sit on the sidelines would be very costly if a missed signal is the big Kahuna of the decade.
Richard Dennis taught the turtles to use volatility adjusted stops that were twice the 20-day moving average of the true range. This is the formula in standard notation,
Notice that this formula automatically widens the stop with higher volatility. This decreases whipsawing but increases risk.
Another strategy is the whipsaw entry where stops were placed ½ . After four attempts the full 2% of maximum risk would be consumed — instead of in just one shot.
This strategy takes more work because whipsawing knocks the futures trader out of the market more frequently.
Position Size Unit
The position size unit is calculated as a percent of account divided by the market volatility translated into dollars through point value.
The position unit size is decreased to control the increased risk from higher volatility that induces wider stops. Turtle traders set their positions relative to a notional account size and market volatility. This gave them precise control over both the dollar and percentage risk evenly across their trading portfolio.
Max Position Size
Turtle traders scaled into the market to increase potential gains. But pyramiding also ramps risk dramatically. Hence Richard Dennis forced the turtle traders to follow rules to control the maximum amount that could be risked on any market move.
If they broke the rules twice they were fired.
No more than 4 position size units was allowed for any single market. If a second closely correlated market began trending the most that could be added was 2 more contracts — or 6 units. This could be pushed up to 10 contracts in two uncorrelated markets. Twelve units was the maximum position limit if three or more markets were trending.
This helped turtle traders avoid being wiped out in a sudden reversal of the long-term trend.
Starbucks (NASDAQ: SBUX)
Stops and position size are extremely important and merit a clear example.
Here is an example of how this works in the stock market. Starbucks (NASDAQ: SBUX) was trading at $55.97 on November 21 of 2016.
You can collect the daily price data from Yahoo Finance under the symbol SBUX. This spreadsheet shows you to use Yahoo Finance data to calculate a turtle trading system stop (ATR-20).
A double ATR stop is just 3% of the share price in this example. Actual risk can set be much lower.
Imagine an investor plans to scale into a single stock three times with $100,000 dollars for a total of $300,000. The risk on the first scale is just 1%.
This a third of the 3% ATR stop.
This allows a trader to test positive price impact on a 20 or 55-day breakout into new price highs on substantial trading volume.
Position size in the stock market is a function of the number of cash, equity or debt assets investors choose to purchase for their portfolios.
The S&P E-Mini Futures Contract
Many futures traders use the E-Mini contract to hedge large stock portfolios. The turtles traded it for speculative gain.
Here is how to calculate a volatility stop on this contract as a Turtle trader. I have condensed the table by hiding the Hi-Ci-1, Ci-1-Li, and Max columns to fit the table.
The stop loss is twice the average true range of 20.5875 points calculated as,
Stop = 2 X 20.5875 points = 41.175 points. The stop is set at this level above the market if short or below if long.
Futures contract valuation is more complicated than calculating stops against the share price of a stock. Each point value is a futures contract multiplier. Point value for the E-Mini futures contract is $50.
The product of the 20-day moving average of the true range and the point value is,
20.5875 points X $50 per point = $1,029. The maximum allowable loss per trade is twice this at $2,058.
With this information, the unit for position size calculations can be computed.
The appropriate trade size for a million-dollar margin account is 9.7 position units.
Round down to 9 contracts. Notice that a $50,000 margin account is under-capitalized to trade a single E-Mini contract in this formulation.
One half of a contract rounds down to zero. This system generates enormous positions that simulate great fear of loss. Only traders who can control fear and associated emotions such as anger and frustration are equipped to survive as Richard Dennis sagely observes.
The turtle traders were taught to exit when the market hit the 10 or 20 day high if short — or low if long. The 10-day prior low/high exit rule applies to a 20-day breakout entry. The 20-day prior low/high exit rule is for a 55-day breakout entry. These rules are based on the observation that most breakouts do not generate strong trends.
Exit rules like these require great courage. Riding through 10 and 20 day retracements just to exit on a reaction to the major trend relinquishes an enormous amount of paper gain.
This simple momentum trading system is associated with high account volatility.
The turtle traders adjusted their strategy to different situations. They traded such large amounts that they didn’t want floor brokers to know what their stops were. They had other canned strategies to deal with fast markets, simultaneous entry signals, strength and weakness within futures groups, and rolling expiring contracts.
Breakouts have been traded for centuries. Nathan Rothschild traded consol bonds in London in 1815 after the defeat of Napoleon at Waterloo as British government debt prices broke to the upside.
The evidence that there is nothing special about the people who were recruited for the Turtle Trading Experiment is the case of Salem Abraham.
The rules described above were taught to the traders over two-weeks. Salem was introduced to these rules in a much shorter span of time by the most successful turtle of all, Jerry Parker.
His successes include a deal where he made $9 million on an investment of $1.5 million.
Of course, many turtles bathe in the limelight of a myth that they are somehow superior human beings. Nothing could be further from the truth.
Why Nobody Talks about the Turtles Anymore
The turtles became famous in the late eighties. This was before the internet and computing capacity we have today.
The turtle trading rules are simple.
Modern futures traders can employ these methods out of a spare bedroom. The irony is that few people have the discipline to consistently apply such rules.
Others lack the stomach.
The turtle trading algorithm ramps up positions to staggering sizes that induce great fear of loss. Unchecked emotions that generate desires to cut winners short while riding losers are exaggerated.
Only individuals who have a firm control over fear and its evil twin anger have any hope to succeed at applying turtle rules to their trading.
In short, the world has moved on. Once experts could peer inside the turtle trading black box they found nothing new.
Egotistical infighting within the group destabilized relationships as documented by Michael Covel in “The Complete Turtle Trader” available on Amazon. Russel Sands didn’t last a year in the program.
He began selling the rules for thousands.
Curtis Faith gave away the rules for free on the internet to create demand for his money management operations that would prove unsuccessful. This undermined the marketing of the Russel Sands course.
Richard Dennis suffered failures as a money manager. The Turtle Trading Rules never gained widespread popularity amidst the bad press.
Once such information is leaked for free it is deemed worthless. This is an example of how people evaluate public information as low value.
Therefore, nobody is talking about turtle traders anymore. But, this is your best starting point for planning your trading system rules. -Doc Brown
Bonus Lecture: My Special Udemy Coupon Offer to You
|Quiz 3||3 questions|
This quiz covers aspects of the TnT Autopilot system itself.
"There is no one like you that I know of who is this transparent, that is what makes your service and education so valuable. Please keep on." -L.B. A Washington State Stock Investor
Dr. Scott Brown and “Intelligent Investing” — helping you get the most out of your hard earned investment capital.
As an investor, I have spent over 35 years reading anecdotal accounts of the greatest investors and traders in history. My net worth has grown dramatically by applying the distilled wisdom of past giants.
I have researched and tested what works in the world’s most challenging capital markets — and I teach you every trick I know in my Udemy courses!
>>>Learn from leading financial experts!
>>> How about discovering how I have tripled family member’s accounts in six years with simple stock picks?
>>> Want to master set and forget limit stop loss tactics for sound sleep?
>>> Does Forexinterest you?
>>>Is your employer sponsored 401(k) plan optimized?
>>>Do you know the fastest rising highest dividend yielding common stock shares in the market today?
>>> High roller? How would you like to know how to dramatically lever your savings with deep-in-the-money call options?
Enrollin my Udemy courses — you can prosper from all of this — plus much, much more now!
(In the last six years we have exploded our net worth and are absolutely debt free, we live a semi-retired Caribbeanlifestyle in atriple gatedupscale planned community from a spacious low maintenance condo looking down on our tropical beach paradise below).
My Curriculum Vitae:
Investment Writing and Speaking:
I am an internationalspeaker oninvestments. In 2010 I gave a series of lectures onboard Brilliance of the Seas as a guest speaker on their Mediterranean cruise. Financial topics are normally forbidden for cruise speakers. But with me they make an exception because of my financial pedigree.
On day 6 the topic I discussed was “Free and Clear: Secrets of Safely Investing in Real Estate!“ The day 7 topic was “Investment Style and Category: How the Stock Market Really Works!” Then on day 8 I spoke about “The 20% Solution: How to Survive and Thrive Financially in any Market!” The final talk on day 11 was “Value Investing for Dummies: When Dumb Money is Smart!”
Gina Verteouris is the Cruise Programs Administrator of the Brilliance of the Seas of Royal Caribbean Cruise Lines. Regarding my on-board teachings she writes on June 19th, “You have really gone above and beyond expectations with your lectures and we have received many positive comments from our Guests.”
I sponsored and organized an investing conference at Caesars Palace in Las Vegas in 2011 under my Wallet Doctor brand. This intimate conference was attended by 14 paying attendees.
As such many strides were made in financial education that week. For instance I met a woman who is a retired engineer from the Reno, Nevada area.
She made a fortune on deep in the money calls during the bull markets of the 90s.
This humble and retired engineer inspired me to look more seriously at deep in the money calls with far expiration. She also gave me an important clue regarding trading volume.
Her call option and volume insights have been confirmed in the Journal of Finance.
In 2012 I gave a workshop at the FreedomFest Global Financial Summit on stock investing at the Atlantis Bahamas Resort. I was also a panelist on a discussion of capital markets.
My course “How to Build a Million Dollar Portfolio from Scratch" at the Oxford Club is an international bestseller. In 2014 I co-authored “Tax Advantaged Wealth” with leading IRS expert Jack Cohen, CPA. This was the crown jewel of the Oxford Club Wealth Survival Summit.
I have been a regular speaker at the Investment U Conferences.
In 2012 I gave a workshop entitled “How to Increase Oxford Club Newsletter Returns by 10 Fold!” The conference was held at the Grand Del Mar Resort in San Diego, California. This resort destination is rated #1 on TripAdvisor.
In 2013 I spoke at the Oxford Club’s Investment U Conference in San Diego California. The talk was entitled “The Best Buy Signal in 103 Years!” Later in the summer I spoke at the Oxford Club Private Wealth Conference at the Ojai Valley Inn.
This was at the same time that Jimmy Kimmel married Molly McNearney in the posh California celebrity resort. It was fun to watch some of the celebrities who lingered.
I also operate a live weekly investment mentorship subscription service under the Bullet-Proof brand every Monday night by GoToWebinar.
I am an associate professor of finance of the AACSB Accredited Graduate School of Business at the University of Puerto Rico. My research appears in some of the most prestigious academic journals in the field of investments including the Journal of Financial Research and Financial Management. This work is highly regarded on both Main Street and Wall Street. My research on investment newsletter returns was considered so important to investors that it was featured in the CFA Digest.
The Certified Financial Analyst (CFA)is the most prestigious practitioner credential in investments on Wall Street.
Prestigious finance professor Bill Christie of the Owen School of Business of Vanderbilt University and then editor of Financial Management felt that our study was valuable to financial society. We showed that the average investment newsletter is not worth the cost of subscription.
I am the lead researcher on the Puerto Rico Act 20 and 22 job impact study. This was signed between DDEC secretary Alberto Bacó and Chancellor Severino of the University of Puerto Rico.
(See Brown, S., Cao-Alvira, J. & Powers, E. (2013). Do Investment Newsletters Move Markets? Financial Management, Vol. XXXXII, (2), 315-338. And see Brown, S., Powers, E., & Koch, T. (2009). Slippage and the Choice of Market or Limit orders in Futures Trading. Journal of Financial Research, Vol. XXXII (3), 305-309)
I hold a Ph.D. in Finance from the AACSB Accredited Darla Moore School of Business of the University of South Carolina. My dissertation on futures market slippage was sponsored by The Chicago Board of Trade. Eric Powers, Tim Koch, and Glenn Harrison composed my dissertation committee. Professor Powers holds his Ph.D. in finance from the Sloan School of Business at the Massachusetts Institute of Technology [MIT]. Eric is a leading researcher in corporate finance and is a thought leader in spin offs and carve outs.
Dr. Harrison is the C.V. Starr economics professor at the J. Mack Robinson School of Business at Georgia State University.
He holds his doctorate in economics from the University of California at Los Angeles. Glenn is a thought leader in experimental economics and is the director of the Center for the Economic Analysis of Risk.
Tim Koch is a professor of banking. Dr. Koch holds his Ph.D. in finance from Purdue University and is a major influence in the industry.
My dissertation proved that under normal conditions traders and investors are better off entering on market while protectingwith stop limit orders. The subsequent article was published in the prestigious Journal of Financial Research now domiciled at Texas Tech University — a leading research institution.
I earned a masters in international financial management from the Thunderbird American Graduate School of International Business. Thunderbird consistently ranks as the #1 international business school in the U.S. News & World Report, and BloombergBusinessWeek.
I spoke at the 2010 annual conference of the International Association of Business and Economics (IABE) conference in Las Vegas, Nevada. The research presented facts regarding price changes as orders flow increases in the stock market by advisory services.
I spoke at the 2010 Financial Management Association [FMA] annual conference in New York on investment newsletters. The paper was later published in the prestigious journal “Financial Management.”
I presented an important study named “Do Investment Newsletters Move Markets?” at the XLVI Annual Meeting of the Consejo Latinoamericano de Escuelas de Administración (CLADEA) in 2011 in San Juan, Puerto Rico. The year before that I presented my futures slippage research at a major renewable energy conference in Ubatuba, Brazil.
I spoke at the Clute International Conferences in 2011 in Las Vegas, Nevada. The research dealt with the price impact of newsletter recommendations in the stock market.
I presented a working paper entitled “The Life Cycle of Make-whole Call Provisions” at the 2013 Annual Meeting of the Southern Finance Association in Fajardo, Puerto Rico in session B.2 Debt Issues chaired by Professor LeRoy D. Brooks of John Carroll University. Luis Garcia-Feijoo of Florida Atlantic University was the discussant. I chaired the session entitled “Credit And Default Risk: Origins And Resolution.” Then I was the discussant for research entitled "NPL Resolution: Bank-Level Evidence From A Low Income Country" by finance professor Lucy Chernykh of Clemson University and Abu S Amin of Sacred Heart University and Mahmood Osman Imam of the University of Dhaka in Bangladesh.
That same year I presented the same study to the Annual Meeting of the Financial Management Association in Chicago, Illinois. I did so in session 183 – Topics in Mergers and Acquisitions chaired by James Conover of the University of North Texas with Teresa Conover as discussant. I chaired session 075 – Financial Crisis: Bank Debt Issuance and Fund Allocation. Then I was the discussant for TARP Funds Distribution: Evidence from Bank Internal Capital Markets by Elisabeta Pana of Illinois Wesleyan University and Tarun Mukherjee of the University of New Orleans.
I am a member of the MBA Curriculum Review Committee, the MBA Admissions Committee, The Doctoral Finance Admissions Committee, the Graduate School Personnel Committee, and the Doctoral Program Committee of the School of Business of the University of Puerto Rico.
I am the editor of Momentum Investor Magazine. I co-founded the magazine with publisher Daniel Hall, J.D. We have published three issues so far. Momentum Investor Magazine allows me to interview very important people in the finance industry. I interview sub director Suarez of the DDEC responsible for the assignment of Puerto Rico act 20 and 22 licenses for corporate and portfolio tax reduction in the third edition. Then I interview renowned value investor Mohnish Prabia in the upcoming fourth edition — to be made available via Udemy. Valuable stock market information will be taught throughout.
In October of 2010 I arranged for the donation to The Graduate School of Business of the University of Puerto Rico of $67,248 worth of financial software to the department that has been used in different courses. This was graciously awarded by Gecko Software.
I have guided thousands of investors to superior returns. I very much look forward to mentoring you as to managing your investments to your optima! –Scott
Dr. Scott Brown, Associate Professor of Finance of the AACSB Accredited Graduate School of Business of the University of Puerto Rico.
Studied Electrical Engineering and Computer Science at the Massachusetts Institute of Technology in 2006. Finished a Master in Business at the University of Puerto Rico (U.P.R) specialized in Finance in 2010. Currently a J.D candidate enrolled in the U.P.R Law School.
Relevant Coursework: Accounting for Analysis and Control; Macroeconomics; Managerial Finance; Statistics & Probability Analysis; Applied Investment Management; Advanced Derivative Asset Analysis; Fixed Income Securities Analysis; Linear Algebra; Multi-variable Calculus; Differential Equations; Signals and Systems; Probabilistic System Analysis;
As an active Stocks, Futures & Forex trader, I've been working in the financial industry for over 21 years, and have taught my unique ideas and concepts to clients, professional traders, and brokers from all around the world.
I've also had the good fortune of having been invited to present at the Chicago Board of Trade and the Chicago Mercantile Exchange Education Centers on multiple occasions.
Probably my greatest accomplishment, and contribution to our industry, is being the founder and Chairman of Gecko Software, and chief design architect of the award winning line of Track 'n Trade LIVE trading platforms, as well as our famous TradeMiner, and NewsMiner market research tools. (Tools my team and I designed primarily for our own personal use in trading.)
I also own Gecko Financial Services, a boutique brokerage firm we created for the sole purpose of providing better, safer, more trustworthy, and less expensive brokerage services to our software clients, friends, and family.
One of my great passions is also being the President, and founder of PitNews Press, my own publishing house, which I've dedicated to publications regarding the financial industry.
I'm also the Editor in Chief of PitNews Magazine, a digital magazine that's been in publication since 1998. I'm proud to say that I'm also an accomplished author, having published several books on trading, through my own publishing company of course, and distributed direct, as well as through Amazon, in print, as well as in digital format.
I'm an accomplished public speaker, trainer, and coach, having taught my live trading seminars to dozens of large audiences across the US, as well as internationally.
Even though I've authored several books, some of my favorite work has been creating my ever popular 'boot camp' video training courses on trading, where I cover such topics as recurring price patterns, Fibonacci and Elliott Wave, Options, Auto Trading Systems, and of course my favorite subject, how to trade using our proprietary systems & indicators: The Bulls 'n Bears, and Advantage Lines.