The Turtle Traders’ 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 (nature versus nurture) in trading history.

In mid-1983, 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. A thousand people replied. The following year he repeated the advertisement and 15,000 people responded.

In all he took on around 21 men and two women from diverse backgrounds. The group of traders were shoved into a large sparsely furnished room in downtown Chicago and for two weeks Dennis taught them the rudiments of futures trading.


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Richard Dennis nicknamed his protégés Turtles after visiting a turtle farm in Asia. Dennis proclaimed that he could grow traders in the same way that farm-grown turtles were raised.

At the time, Dennis’s practice of how to trade financial markets were in startling contrast to the long-held views of academics and practitioners around the country. “There was no buying and holding, or even buying low and selling high,” says Michael Covel, American entrepreneur and author of the best-selling, ‘The Complete Turtle Trader’ (

Rather, Dennis taught a trading style with characteristics that traders worldwide now apply. In essence, traders were taught to spot share prices that are trending, and buy and sell into the trend. By following the trend, traders were optimising their chances of making a fast buck.

After the two-week training was complete the Turtles were given accounts (around $US1 million each) and left to their own stgices. Loaded up with reams of paper and pens – unlike the emphasis today, Turtle traders did not use sophisticated software.

The Turtle Trader rule was to place no more than 2% on a single trade – a rule rooted in risk management – within a correlated group.

During the first year Turtles received a base salary plus 20% of the profits.

Former Turtle, Michael Shannon, who now lives in Sydney was taken on board by Dennis in 1984. His first year grossed him $US384,000.

Shannon describes; “an office full of guys wearing shorts and playing ping pong most of the time.” Clearly, when it came to trading Turtle-style there were long periods of downtime.

Interestingly, Shannon didn’t come from a strong ‘trading background.’ Before he met up with Dennis to learn the arts of Turtle trading, he says that he was the world’s worst futures broker. In fact, according to Shannon, his lack of skills in futures trading was what landed him the gig. Dennis didn’t want trainees to have to “unlearn” bad habits.

The vetting process for applicants was extensive. Shannon tells that the bottom line was an assessment of applicants’ “psychological makeup for trading”. The one common factor being that all trainees enjoyed games of chance.

“Essentially Dennis was looking for people who would follow his methodology and pull the trigger on a trade,” says Shannon.

Dennis’ trading rules were based on “observable, empirical, measurable evidence and subject to laws of reasoning”, says Covel:

Define the question. Gather information and resources. Form hypotheses. Perform experiment and collect data. Analyse data. Interpret data and draw conclusions. Publish results.

Dennis taught a ‘trend following’ trading methodology and consistently scoffed at fundamental analysis stating that once information gets into the market it is inherently flawed.

Trend followers maintain that market trends are unpredictable. “Once you recognise that market moves are random you simply need to put yourself in a position where you can capitalise on a move when it happens,” explains Covel.

“Seven out of ten will be dogs but three will make money and trend followers know that the winners will pay for the losses and give them a tidy profit.”

The Turtles traded futures contracts – anything from gold to oil to stocks – and were taught that analysing price movement was the be and end all of trading. “We’re purely technicians,” says Shannon. “Dennis taught us to be consistent, disciplined and execute the signals that come up and he was right.

“There are days when you take a significant hit and there are days when you make lots of money and of those the days when you make lots of money is probably the most psychologically damaging because suddenly you become fearless.”

Shannon went on to work as a proprietary trader and retired due to family reasons at the end of 2006. Today, Shannon says that he’s missing the stimulation and is keen to return to the trading world.

At the end of the day, the Turtle Trading experiment was pretty worthwhile for Shannon personally. He walked away from the four years he spent with Dennis with roughly $US2.5-3 million.

It has been reported that former Turtle Jerry Parker made over $US 500 million. But as Covel says, much of the experiment remains shrouded in secrecy, with misconceptions and untruths rife.

“Interestingly the Turtles all made big money while they were working for Richard Dennis. However in 1988 when they went out on their own things it was another story,” says Covel.

“Many didn’t stick with it and fell apart. So even though there was a mechanical system that they all knew worked, at the end of the day other factors such as character issues became their downfall.”

American global macro trader Mike Martin explains Richard Dennis’ system.

“There were actually two systems,” explains Martin. “The first was a shorter-term 20-day breakout system; the second, a longer-term 55-day system.” Traders could choose either one but had to stick to the one they selected.

“The Turtle rules made up a “breakout system” – that is, buying and selling into new prices above and below previously defined highs and lows.

“The rules were a simple set of entries and exits, trading approximately two-dozen commodities. Position sizes were adjusted for volatility as measured by the commodity’s Average True Range (ATR).

“The Turtle rules consisted therefore of a trend-following system of entries, exits and risk management. The model was built to catch the middle of the move and although Turtle trading results were volatile, the group was always managing risk. In essence, risk management was everything.

“The system is genius in its simplicity. A certain mathematical elegance can be found in its use of ATR for entries, exits and position sizes and what you get out of each is up to you,” concludes Martin.