Greatest Trading of All Time

BY SCOTT WELSH


I’ve always been a huge fan of the Turtles.

If you don’t know, the Turtles are the subjects of arguably the most famous trading story of all time.

Back in the 1980’s, two millionaire traders, Richard Dennis and William Eckhardt, got into an argument about whether traders are made or born.

They wondered if it’s possible to take people off the street, teach them to trade, and make them into millionaires. Or, as Eckhardt believed, is trading prowess something you’re born with and cannot be taught?

Like any other mad geniuses, they decided to risk millions of their own money to find out.

Dennis and Eckhardt then put an ad in the newspaper, did some interviews, and eventually settled on eleven candidates. These candidates ended up being called Turtles, which came from an experience Dennis had watching a Turtle-breeding farm in Singapore. “We are going to grow traders just like they grow turtles in Singapore,” Dennis reportedly said.

Once the eleven had been chosen, those original Turtles were given a mere two weeks of training, and then each was given one million dollars to trade. Was the experiment successful?

Although exact numbers can’t ever be known, public records show that the Turtles routinely returned 150-200% per year in the four years the Turtle program existed, and total profits from the Turtles have been estimated at $181 million.  Staggering.

What might even be more staggering are the implications.

One, the Turtles proved that anyone can be a great trader,

and that you don’t even need that much training. Eight hours a day for two weeks is apparently all that’s necessary.

Two, the Turtle system was 100% mechanical.

There was no discretionary trading allowed. Richard Dennis, who had legendarily borrowed $1,600 and turned it into $200 million in ten years, believed that some trading tenets were timeless. The system he traded was based on principles he believed would never fall out of favor, and then he did exhaustive testing on those principles. Because he believed in his fundamentals and his testing so strongly, the Turtles were never allowed to make any decisions on their own. Their only job was to follow the rules exactly.

And they made millions.

After the experiment ended, the Turtles remained quiet for years as confidentiality agreements forced them to hold their tongues. But that time has long passed and now all the secrets are out.

The question now is: Do the Turtles’ trading methods still work?

It’s been thirty years since they traded the markets. Is anything they did still relevant?

To answer that question, all you have to do is look at Jerry Parker. Parker was one of the original eleven, and he is generally considered the most successful Turtle of all time. After finishing his four-year stint in the Turtle Program, Parker then founded a trading fund in 1988 which he named Chesapeake Capital.

Parker was a devout follower of Dennis and Eckhardt’s methods and vowed to continue trading in the same manner for his clients.

Has it worked? How much money did Jerry Parker make?

From 1988 through today (Oct. 21, 2015), Chesapeake Capital has averaged 12% per year and has $230 million of assets under management (AUM). Chesapeake is currently ranked as the 24th-best CTA in the world.

But that’s not the end of it. Other Turtles have gone on to manage money very successfully and are still doing it today. Here are the Turtles currently ranked in the top 40 CTAs in the world:

  • #8 Abraham Trading Company; 16.4% return per year since 1988; $250 million AUM
  • #18 Eckhardt Trading Company; 13.7% return per year since ’91; $307 million AUM
  • #23 Chesapeake Trading Company; 12.0% return per year since ’88; $230 million AUM
  • #26 Rabar Market Research Inc.; 11.08% return per year since ’89; $116 million AUM

All told, members of the Turtle program are currently trading over 900 million dollars.

As you can see, the Turtles have been trading basically the same system for thirty years. Even William Eckhardt himself, the original founder, is still trading using Turtle principles and has been operating a fund since 1991.

Now, you could argue that other traders have done better than the Turtles.

You could say that Peter Lynch did this or Paul Tudor Jones did that. You could say that George Soros has had some monster years or even that John Paulson may have had the best trade ever.

And, of course, you could say that Warren Buffett has beaten the Turtles’ averages over time.

But, Buffett aside, no one person (or group of people) have traded so well for so long using basically the same system the entire time.

No one has traded a system so mechanical, and so repeatable, and has been so successful for such an extended period.

And let’s be honest, we’re never going to know what Warren Buffett has really been up to all this time. Following Buffett’s methods is a pipe dream. Following the Turtle methods is just a matter of following their simple rules.

In short, it’s extremely difficult, if not impossible, to find a trading system that has put up numbers like the Turtles have for three decades.

The Turtles taught us that anyone can do it. If you take fundamental principles and trade them in a rigidly mechanical fashion (many Turtle-like traders are completely automated, in fact), you can be successful. So, after reading every book I could find on the Turtles and listening to tons of podcasts on Turtle traders (or those who follow their methods), I recently had one of their original strategies programmed and then did a boatload of testing.