Way of the Turtle

Book Review #10

The Turtle experiment which forms the subject of this enlightening book began as a bet between trading gurus Richard Dennis and William Eckhardt over 20 years ago. Dennis’s hypothesis, in contrast to his colleague’s, was that he could transform almost anyone into a winning trader.

The trainees that were recruited, trained and backed financially with million dollar trading accounts were known as the Turtles as Dennis believed that he could raise traders in the same way they raise turtles on farms in Singapore. This book was written by one of the most successful Turtles, Curtis M. Faith. In Way of the Turtle he shares his experiences, what he was taught, what he believes are the most important aspects of trading and why he succeeded where others failed.

The Turtles were taught to think of the long run and were given a mechanical system with an edge that overtime would be successful. Their primary goal was to stay in the game and the rules the Turtles had to follow were very simple. The key to their success would be consistency and discipline. The Turtle method was based on market movements that result from the systematic and repeated irrationality that are embedded in the majority of traders’ emotions. They never tried to predict market direction, but looked for indicators that a market was in a particular state. Dennis believed that good traders don’t try to predict what the market will do, but understand what the market is actually doing. For example, during fast market conditions the Turtles were advised not to panic but to wait for the market to stabilize before placing their orders. They were also implored to ignore the outcome of individual trades, to forget the past, to learn from it, to not worry about it and to believe in the effects of trading with positive expectation.

The difference between the best and worst performing of the Turtles was their individual psychological makeup. The author reveals the insurmountable challenge for some of the Turtles of accurately following the instructions of their mentors. Even though they were shown a successful trading system, many Turtles simply could not overcome their characters, emotions and ego to achieve significant profit. Although Faith proves that trading can be taught successfully, I believe you have to be committed, disciplined and most of all honest with yourself if you want to make it as a trader. The key lesson for me from Curtis’s book was to understand the importance of psychology in both market behaviour and individual performance. Whilst human emotion can be a source of great opportunity in trading, it can also be one of the greatest obstacles to consistent success. Market participants in financial markets do not always act rationally. Winning traders, like the best of the Turtles, take advantage of this irrational behaviour.