PZ Turtle Trading EA MT5

The Turtle Trading EA is an Expert Advisor that implements the original Dennis Richards and Bill Eckhart trading system commonly known as The Turtle Trader. It follows every turtle trading rule to the finest detail, including trade filtering by the outcome of the last signal and drawdown control.

• Trade exactly like the Original Turtles did
• Make sure to capture all big market movements
• Follow trends to the end and profit in up or down markets
• Get home run returns applying a proven trend following system
• An unmatchable semi-automated companion for experienced traders
• Fully automated trading 24/5

Introduction

The Turtle Trader legend began with a bet between American multi-millionaire commodities trader, Richard Dennis and his business partner, William Eckhardt. Dennis believed that traders could be taught to be great; Eckhardt disagreed asserting that genetics were the determining factor and that skilled traders were born with an innate sense of timing and a gift for reading market trends. What transpired in 1983-1984 became one of the most famous experiments in trading history. Averaging 80% per year, the program was a success, showing that anyone with a good set of rules and sufficient funds could be successful.

In mid-1983, Richard Dennis put an advertisement in the Wall Street Journal stating that he was seeking applicants to train in his proprietary trading concepts and that experience was unnecessary. In all, he took on around 21 men and two women from diverse backgrounds. The group of traders was shoved into a large sparsely furnished room in downtown Chicago and for two weeks Dennis taught them the rudiments of futures trading. Almost every single one of them became a profitable trader, and made a little fortune in the years to come.

Entry Strategy

The Turtles learned two breakout variants or "systems". System One (S1) used a 20-day price breakout for entry. However, the entry was filtered by a rule that was designed to increase the odds of catching a big trend, which states that a trading signal should be ignored if the last signal was profitable.

But this filter rule had a built-in problem. What if the Turtles skipped the entry breakout and that skipped breakout was the beginning of a huge and profitable trend that roared up or down? Not good to be on the sidelines with a market taking off!

If the Turtles skipped a System One 20-day breakout and the market kept trending, they could and would get back in at the System Two (S2) 55-day breakout. This fail-safe System Two breakout was how the Turtles kept from missing big trends that were filtered out.

The entry strategy using System Two is as follows:

• Buy a 55-day breakout if we are not in the market;
• Short a 55-day breakout if we are not in the market.

The entry strategy using System One is as follows:

• Buy a 20-day breakouts if the last S1 signal was a loss;
• Short a 20-day breakouts if the last S1 signal was a loss.

The Turtles calculated the stop-loss for all trades using the Average True Range of the last 30 days, a value which they called N. Initial stop-loss was always ATR(30) * 2, or in their words, two volatility units. Additionally, the Turtles would pile profits back into winning trades to maximize their winnings, commonly known as pyramiding. They could pyramid a maximum of 4 trades separated from each other by 1/2 volatility unit.

Exit Strategy

The Turtles learned to exit their trades using breakouts in the opposite direction, which allowed them to ride very long trends.

The exit strategy using System Two is as follows:

• Exit long positions if/when the price touches a 20-day low
• Close short positions if/when the price touches a 20-day high

The exit strategy using System One is as follows:

• Close long positions if/when the price touches 10-day low
• Close short positions if/when the price touches a 10-day high
  
  

Money Management

The initial risk allocation for all trades was 2%. However, aggressive pyramiding of more and more units had a downside: if no big trend materialized, then those little losses from false break-outs would eat away even faster at the Turtles' limited capital.

How did Eckhardt teach the Turtles to handle losing streaks and protect capital? They cut back their unit sizes dramatically. When markets turned around, this preventive behavior of reducing units increased the likelihood of a quick recovery, getting back to making big money again. The rules were simple. For every 10 percent in drawdown in their account, Turtles cut their trading unit risk by 20 percent. This of course applies for bigger numbers: the unit risk would be decreased by 80% with a 40% drawdown!

Settings

When loading the Expert Advisor to any chart, you will be presented with a set of options as input parameters. Don't despair if you think they are too many, because parameters are grouped into self-explanatory blocks. This is what each block of parameters does.

• Turtle Trading Settings
  This group of parameters allows you to customize the period of trading systems S1 and S2 and use of the filters.
  
  
• Adding to positions
  Once a trade was taken, the original turtles would pile up three more positions on top on the first one, by adding an additional trade every time the market moved in their favor 50% of the ATR. This group of parameters allows you to disable or customize this behavior.

• Stop-loss Settings
  The initial stop-loss for all trades is, by default, two times the Average True Range. It is customizable.

• Drawing Settings
  Customize the colors and sizes for arrows and dots displayed on the screen (not all signals are taken if filter enabled).
  
  
• Money Management
  For every 10 percent in drawdown in their account, the turtles cut their trading unit risk by 20 percent. In this group of parameters, you can disable or enable this behavior at will and customize the common money management parameters you are familiar with.
  
  

Some nitty-gritty details

• You don't need the Turtle Trading installed to run the EA
  
• The Expert Advisor trades at bar closing
  
• The exit strategy is evaluated every tick
  
• It trades exactly like the turtles did
  
• Make sure to trade a lot of markets!
  
  

Trading and backtesting

• The Turtle Trading strategy was designed to trade daily charts
• Check the screenshots for the best EURUSD settings
• Backtesting using M1 HLOC prices is enough
• Please run an optimization before trading
  
  

Author

Arturo López Pérez, private investor and speculator, software engineer and founder of Point Zero Trading Solutions.