---
title: 'Turtle Trading Strategy: 4 Rules That Made Novices Profitable'
source: 'https://youtube.com/watch?v=X9edzFqmUyk'
video_id: 'X9edzFqmUyk'
date: 2026-07-12
duration_sec: 1014
---

# Turtle Trading Strategy: 4 Rules That Made Novices Profitable

> Source: [Turtle Trading Strategy: 4 Rules That Made Novices Profitable](https://youtube.com/watch?v=X9edzFqmUyk)

## Summary

The video explains the Turtle Trading strategy, a trend-following system taught by Richard Dennis to 13 novices in 1983, who became profitable traders in two weeks. It covers four simple rules: risk management, short-term entry using 20-day Donchian channels, long-term entry using 55-day Donchian channels, and exit rules based on ATR and trailing stops.

### Key Points

- **Turtle Experiment Origin** [00:01] — Richard Dennis, a legendary trader, taught a group of 13 people with no prior knowledge a trading strategy in two weeks, turning them into professional traders. This was the Turtle Experiment, named after turtle breeders in Singapore.
- **Dennis's Background** [00:59] — Dennis started trading commodities in 1970 with less than $2,000 and became a millionaire in under four years. He then partnered with William Eckard to conduct the experiment.
- **Strategy Overview** [02:30] — The strategy is trend-following, trading S&P 500 stocks, Treasury bonds, major currencies, and commodities like gold and coffee. It seeks highly liquid assets for easy entry/exit.
- **Risk Management Rule** [02:46] — Never risk more than 2% of the account per trade. During drawdowns, they calculated position sizes as if losses were double (e.g., 10% loss treated as 20%) to preserve capital.
- **Short-Term Entry Rule** [05:21] — Enter on a breakout of the 20-session Donchian channel. Use TradingView's Donchian Channels indicator with length 20. Execute immediately on breakout, not waiting for close.
- **Long-Term Entry Rule** [06:50] — Enter on a breakout of the 55-session Donchian channel. Configure by setting length to 55. This captures longer-term trends.
- **Pyramiding Rule** [08:45] — For every 0.50% profit in favor, add an extra 0.50% to the position, up to 2% additional risk (four additions).
- **Stop Loss Rule** [09:51] — Use 30-session ATR multiplied by 2 to set stop loss. Do not place stop orders; manually exit when price hits the level to avoid revealing positions.
- **Take Profit Rule** [11:32] — For short-term entries, exit when price breaks the low of the last 10 days (for long positions) or high of last 10 days (for short positions). For long-term entries, use 20-day lookback.

### Conclusion

The Turtle Trading strategy is a simple, rule-based trend-following system with strict risk management. Its success hinges on discipline and money management, not subjective analysis.

## Transcript

taught a trading strategy in two weeks that generates an 80% annual return. Well, this gentleman here is Richard Denis, and he taught a trading strategy from scratch to a group of 13 people with no prior
knowledge, turning them into professional traders. In this video, I'm going to explain exactly what they were taught, how they were able to become profitable in just two weeks, and
what the four simple rules are that make up searching, I've also found the code to replicate the same strategy. So, if you stay until the end of the video, you can decide for yourself whether you want me to
video, you can decide for yourself whether you want me to share it or traders in history. He started trading commodities
around 1970 with less than $2,000 in capital. Well, in less than four years, he had become a millionaire. Having achieved all his goals as a trader, he decided to shift his focus and concentrate directly on training. It was at
this point that he joined forces with William Eckard, and together they conducted an experiment.  In this experiment, Richard Denis himself wanted to verify that anyone, properly trained, could become a professional trader. So,
in 1983, the experiment was born in which Richard Denis and William Eckard selected a group of 13 people who knew nothing about trading. They taught them a
very simple four-step trading strategy over two weeks and provided them with real money trading accounts to resolve the question of whether a trader is born or made. This is called the Turtle Experiment, since
Richard Denis had previously traveled to Singapore where he saw turtle breeders in captivity, and he was completely convinced that he could raise professional traders in the same way turtles were raised. Before
defining the four rules that make up the strategy, I want to emphasize that it is a trend-following strategy that trades S500 stocks, Treasury bonds, major currencies, and commodities such as gold and coffee. So,
does is constantly seek out highly liquid assets so that entering and exiting the market is quite simple, and so that volatility itself can provide constant trading opportunities. The first rule of all is
risk management, and it's precisely the most complex part of the entire strategy, since Richard Denis himself was obsessed with the idea that risk management had to comply with very specific rules. To begin with, they
never risked more than 2% of the account. Keep in mind that during the two-week training period, they traded on demo accounts, but once that training was over, Richard Denis gave each of the 13 participants
gave each of the 13 participants real money accounts ranging from $500,000 to $2 million. In my opinion, trading with so much capital is an advantage because it allows you to be much more conservative with those risks and position sizes,
but you have to consider that 2% of $2 million is a risk of $40,000. So, any of those traders who loses a trade will automatically lose $40,000, something that's really tough for anyone.
Imagine how tough it must be for people who had never had any kind of experience with trading and who had only two weeks of training. But it goes much further than that, because  Through
market volatility— I'll explain later how you measure it—they calculated position sizes. So they were only trading when that volatility met the parameters of their
trading rules, risking, as I mentioned, a maximum of 2% of their total account. Furthermore, during drawdown periods— imagine they lost up to imagine they lost up to 10%—they calculated as if they were
10%—they calculated as if they were losing 20%. Instead of calculating that 2% position size based on a 10 % loss, which was the % loss, which was the real loss, they calculated it based on a 20% loss,
which was fictitious. They did this simply because they knew their system was a long-term winner. So, during drawdowns, that is, losses, they only had to maintain and preserve their capital for as long as possible
until new profits arrived. And honestly, I could dedicate one, two, or even ten videos exclusively to the money and capital management of the strategy. In fact, I'll ask you about it later, but
in this video, I just want to summarize the main rules that The following rule is the short-term entry, and here we begin with the executions, which will be divided into two types, that is,
two different rules. In the short-term entry, we will wait for an upward or downward breakout of the Donan channels. To locate and set the Donan channels in TradingView, we go to the top left
where it says "Indicators," click, and type "Donan channels." A single indicator will appear, so we click on it, and now we have the
channels set. The moment you see a breakout form—in this case, it will be from the upper part of the 20-session channel— we will execute the position to then be within what
this strategy considers the trend. And that's the simplicity of the first entry rule: we only have to wait for that or it could also be a lower breakout. But before moving on to the
next entry rule, what's much simpler is to like this comment saying what you think. Subscribe if you aren't already. Also, remember that at the end of the video I'm going to talk
about the code for this strategy, where you'll have to decide whether you want me to share it or not. hides a few secrets. Now we're on to the
third rule: the long-term entry. Imagine you miss a short-term execution, meaning the 20-session Donan Channel breaks. But you're not planning to execute it. Well, with this second execution rule, you will be able to execute the third
rule of the strategy because it uses the same system for the long- term entry (Donan Channel break), but in this case, a 55-session Donan Channel. To configure the 55-session Donan Channel, go
directly back to TradingView, double-click on the Donan Channel, and where it says "Data Entry," click on it. Instead of setting the length to click on it. Instead of setting the length to 20, set it to 55. Click "Accept," and you'll
have the channels set. So all you have to do is wait for it to happen. The price forms a breakout above the upper boundary of the 55-session channel. At this point, you would execute the entry. I'll explain later how to
participate in what is also presumed to be a long- term trend. Before moving on to the fourth and final rule of the strategy, where I'll discuss how to execute the position and how to exit (since without these
rules, no strategy is worthwhile), I want to mention several points about the executions. First, the timeframe is daily. It can be used on any timeframe, yes, but this strategy is used on a
daily timeframe. The second aspect is that they didn't wait for the daily close to execute the positions. Once they saw that the upper or lower boundary of the Donan channel was being broken, they executed the position; they didn't wait for the
close. The third point is that they could choose whether to trade short- term, long-term, or a mix of both. And the fourth and a mix of both. And the fourth and final point is that for every 0.50%
profit in their favor, they added an extra 0.50% to the position. That is, imagine you execute this position... Here you see the breakout forming at this point here, at the top of the Donan channel, and you execute
more or less at this point, not when the candle is already bullish. Well, for every candle is already bullish. Well, for every 0.50 increase, that is, at this point here it goes up 0.50. What they did was add 0.50 more of their size or their
total account. Again, the price goes up another 0.50, let's mark it, and at the moment it went up that 0.50, they added another 0.50 of extra risk. They did this up to four times because, according to
the strategy rules, they were allowed to add up to 2% extra of their capital. The fourth rule is based on closing the position, where I will explain how they set the Take Profit to exit in profit and how they set the Stop Loss to exit in
loss. Regarding the Stop Loss, they used an indicator. And they didn't place it subjectively, but rather based on the volatility of the asset. For this, they used the 30- session ATR.  By calculating that ATR, they would
multiply it by two, and then they would place the Stop Loss at that point. Now you'll see how easy it is to set the ATR in Trading View, in the upper left corner type " AT"—very important, in this case it appears as "
Average True Range" because it's in Spanish, but many platforms Spanish, but many platforms use English. Then click on it. Now it's set up, and all you have to do
is go to the bottom where the ATR is, double-click on it, and set the length to 30. Sometimes it might be set by default, but make sure this length parameter is at 30. Now, as you can see, the ATR of this asset, which in
see, the ATR of this asset, which in this case is Microsoft, is at seven. This indicates that over the last 30 days it has moved an average of 7 points per day, and as you can see, it's also at a price of
see, it's also at a price of 360. So, that's
in this position. And regarding the Take Profit, remember that they traded trend movements, and one of their premises was not to exit until the trend was ending. This indicates that they didn't have a
rigid way of exiting.  They didn't have a specific breakout point marked. Besides this, there's an interesting anecdote I'll share later: position until they saw the trend ending. To do
this, for short-term entries, they would mark the low of the last 10 days as their exit point if they were long, and the high of the last 10 days as their exit point if they were short. So, imagine
you execute this position you see on the screen right now. The breakout occurs; we have an asset at 156. The first thing we're going to do is set the stop loss. If you look below, the ATR is at
3.75. So, 156 - 156 - 7.50, which is double the marked ATR, gives us 7.50, which is double the marked ATR, gives us
this moment when the upper band of the Donan Channel is broken, and we set the upper band of the Donan Channel is broken, and we set the stop loss at the 148 level. But how could we exit? What method did these people use?  To
exit where that low of the last 10 sessions is, well, that's exactly what we're going to see next. As you can see, the entry trade would have gone quite well, maintaining that trend until it reaches a point where it not
only begins a kind of slowdown but also starts a downward movement. We'll see this next, and it's precisely at the moment when the low of the last 10 days is marked. Here you can
check it. The candlestick is specifically this one. Because if we mark a horizontal line, it's indicating that this is the low of the last 10 days. Well, that's exactly how we would have exited this position.
However, for the long-term entry, they didn't use the same low, but they used the same method. Instead of exiting with the last 10 days, they used the last 20 days, since it's a much larger movement. So,
as a curious fact that I mentioned before, as an anecdote regarding the stop loss, they always used a stop loss; they always had that rule set for when they were going to exit, but despite knowing when they were going to exit, they didn't have a
stop loss.  They didn't leave the order in place; instead, the moment the price reached their stop-loss zone, they executed the order at market. Why? Simply because they didn't want to give information to other traders. You know that
through the order book and other methods you can see where the positions are, so they wanted to mislead. And instead of executing the stop-loss by leaving it set, what they did was wait for the price to reach that zone and execute it
manually. And before moving on to discussing the strategy code, I want to highlight, so you realize if you haven't already, the level of discipline and measurement that the entire strategy has. It's a
very simple system with four very easy-to-execute rules, and the complexity lies in money management. We 've already discussed this many times: money management is what makes a system winning; it's what differentiates a
profitable trader from an unprofitable one. But everything else, despite being unprofitable one. But everything else, despite being very simple rules, is completely stipulated. There's no room for improvisation or subjective analysis.
There are four very clear, very easy, very basic rules, but there's no subjectivity whatsoever.  In the system, and as expected, not everything that glitters is gold. I've already seen the code, I 've seen the bot's statistics, I know
've seen the bot's statistics, I know what works, I know what doesn't, I know the dark side of this strategy, I know if things should be adjusted. And the question here is obvious: do you want to know? If you really want me to
make a video with the code explaining the secrets behind this strategy so you can see for yourself if it works today, so you can download the code and put it in your TradingView, all
you have to do is let me know. How? By smashing the Like button, and leaving your Elo rating in the comments. I want to see if there's real interest because it's a new video I'd have to record, and if you're not that interested,
I'll use the time for another video before I go. pinned comment and in the description of this video, you'll find multiple links of interest: courses, tutorials, training, and 100% free content
about trading so you can continue learning without having to invest your own money. I'm I hope you liked it and that it was helpful, which is the important thing. If so, please with friends and family. See you in the next video!