Hopefully you all got a chance to read the Original Turtle Trading Rules. When I learned about all the drama surrounding some trend following systems I was worried that I might have to retract my review of 'Trend Following'. After reading the rules to the original system I still highly recommend the book. Despite the beef some may have with the author of that book, I think the book is true to what's in the document provided by the Original Turtles.
Many people were/are troubled by the apparent lack of system details in 'Trend Following'. I imagine that those same folks will have issue with the Original Turtle's document as well. These trend following systems are not complex, especially with regard to the entry signals. All they do is enter on the break of a range of X number of days. The complexity comes in other areas like exits, stops and position sizing.
Whether or not your aim is to become a trend follower I think the document is invaluable as an example of building a complete trading system. The Turtles cover aspects of system development that all traders should be concerned with:
- Which markets to trade, with an emphasis on selecting liquid, non-correlated instruments/markets. This is something that I've been thinking about a lot this year, especially after reading 'Trend Following' and 'The New Laws of the Stock Market Jungle'. The fact that most stocks trade together (highly correlated) has always bothered me but those two books really opened my eyes to the fact that I really need to diversify. That's why I was so glad to hear that more commodities may begin to trade as ETFs.
- Position Sizing - You know I agree with the Turtles when they say that "How much to buy or sell is the single most important aspect of trading. Most beginning traders risk far too much on each trade, and greatly increase their chances of going bust, even if they have an otherwise valid trading style."
- Creating a stop loss strategy to get out of losing positions.
- Creating an exit strategy for getting out of winning positions.
- Tactics for entering orders and dealing with fast markets.
So there's some great information in that document and you sure can't argue with the price.
