MQ Trader - Turtle Strategy Rules

Turtle trading is a trend-following strategy used by traders to benefit from the sustained momentum. It tends to look for both upside and downside breakouts which are used as the main concept of turtle trading. To know more about the background of Turtle Trading, please read MQ Trader - Introduction of Turtle Strategy.

1. Markets traded: The turtles traded in large, liquid markets where traders can find sufficient trading opportunities.

For instance, the markets that turtles did trade were as follows:

• 10 & 30 Year U.S. Treasury Bond and 90 Day U.S. Treasury Bills.
• Index futures such as S&P 500.
• Commodities like coffee, sugar, cotton, cocoa, heating oil, unleaded gas and crude oil.
• Precious metals like copper, silver and gold.
• Currencies like the Swiss Franc, Japanese Yen, British Pound and Canadian dollar.

2. Position-sizing: Sophisticated position sizing algorithm is practiced by the Turtle Traders who determine the size of their position based on the volatility of the asset. This system can improve the diversification, as the size of every position is similar to each other. The volatility of the market can be measured by using 20-day exponential moving average of the true range.
3. Entries: 2 simple entry systems are used to enter a position in turtle trading strategy.

System 1: Short-term system based on 20-day breakout.
The first entry triggers when the price breaks out of a 20-day price range if the previous breakout failed. The probability of success for the next breakout is higher if a long or short breakout failed when the price moved back into the range.
System 2: Longer-term system based on 55-day breakout.
The turtles entered (one unit) when the price moved out of a 55-day price range. This breakout method is usually used in case the 20-day breakout was missed.
All the trades are always ended on the breakout before the daily close of the markets.

4. Exit. In turtle system, traders also use 2 systems to exit a position.

System 1: the exit was a 10 day low for long positions and a 10 day high for short positions.
System 2: the time period was extended to 20days for both long and short positions.
High disciplinary is required in following the rules of entering and exiting a position because the returns of trading can be affected remarkably even one or two winning trades are missed in a year.

Figure 1: Trading signals generated by using Turtle Trading Strategy

Is the Turtle Trading Strategy still relevant today?

The Turtle Trading system was proven to work very well for traders in 80’s. Some of you might be wondering whether this system is still effective in the market today. Unfortunately, it does not entirely fit into today’s market which have been changing drastically from time to time. 
However, the basic philosophy has not changed over the years. Some adjustments can be made to make Turtle Trading system for accommodating today’s market movements, as trends still occur where traders can still grab advantage from them. Besides, a system still plays a crucial role in performing successful trading. Without a clearly defined set of parameters for entries, exits, position-sizing and stop losses, a traders is basically using his instinct to make his investment decision. It might eventually lead the trader to overtrade and position-sizing inappropriately.
To ensure that traders make investment decision wisely, quantitative analysis is implemented in MQ Trader stock analysis system to provide traders a set of rule with simple and precise parameters that assist them from stocks picking to risk management. Furthermore, different trading strategies and indicators which are widely used by fund managers, are built into MQ Trader Stock Analysis tool. This is to make sure that traders to confirm a trend is in place based on facts and data instead of emotions and rumors.

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We would like to develop this system based on community feedback to cater for community needs. Thanks to all those who have provided valuable feedback to us. Keep those feedbacks coming in!

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