enjoyed the story and how it compelled me to think on a personal level, When reading most books on stock market investing, readers may feel as though they're being lectured, This book may have lessons to learn from yet it translates in a way Turtle Way that the author is sharing his experiences as a former Turtle day trader.
Some notable lessons include market patterns, managing risks, trader biases and logging your studies,
As I approach the end of the book, I was disappointed to discover that I am not worthy to be a Turtle because I lack the material parameters.
This goes to show that not every way, Turtle Way or otherwise, is right for me, That is, anyway, until I reach those parameters, The book is pretty good it describes that trading is hard job which demands good preparation, a lot of patience, Strategy must be completed with risk assessment, I think that turtles were successful because they have one of the best mentors and at their time market was much simpler than nowadays.
Anyway whether you are discretionary trader or automation fan it is worth reading, On pageso far. Wish there were more examples, real life examples, from Curtis' experience as a Turtle, If you expect to find the "holly grail" of trading, this book is not for you,
If you are searching for common patterns between the winners in this game, you can find a few here,
I particularly liked the psychology part of the book, Here are some quotes:
Scientists call distortions in the way people perceive reality cognitive biases, Here are some of the cognitive biases that affect trading:
Loss aversion: The tendency for people to have a strong preference for avoiding losses over acquiring gains
Sunk costs effect: The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future
Disposition effect: The tendency for people to
lock in gains and ride losses
Outcome bias: The tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made
Recency bias: The tendency to weigh recent data or experience more than earlier data or experience
Anchoring: The tendency to rely too heavily, or anchor, on readily available information
Bandwagon effect: The tendency to believe things because many other people believe them
Belief in the law of small numbers: The tendency to draw unjustified conclusions from too little information
The Turtle Mind
Think in terms of the long run when trading.
Avoid outcome bias.
Believe in the effects of trading with positive expectation,
The lessons of the Turtle class can be summed up in these four points:
, Trade with an Edge: Find a trading strategy that will produce positive returns over the long run because it has a positive expectation.
. Manage Risk: Control risk so that you can continue to trade or you may not be around to see the benefits of a positive expectation system.
. Be Consistent: Execute your plan consistently to achieve the positive expectation of your system,
. Keep It Simple: The core of our approach was simple: catch every trend, Two or three trades might account for all your profits, so don't miss a trend or you might kill your whole year, This is simple and easy to understand, not easy to do,
Dos and Don'ts for Thinking Like a Turtle
, Trade in the present: Do not dwell on the past or try to predict the future, The former is counterproductive, and the latter is impossible,
. Think in terms of probabilities, not prediction: Instead of trying to be right by predicting the market, focus on methods in which the probabilities are in your favor for a successful outcome over the long run.
. Take responsibility for your own trades: Don't blame your mistakes and failures on others, the markets, your broker, and so forth, Take responsibility for your mistakes and learn from them,
To understand why this is important, let's dig further into the components that make up the edge for a system, System edges come from three components:
Portfolio selection: The algorithms that select which markets are valid for trading on any specific day
Entry signals: The algorithms that determine when to buy or sell to enter a trade
Exit signals: The algorithms that determine when to buy or sell to exit a trade
Edges are found in the places that are the battlegrounds between buyers and sellers.
Your task as a trader is to find those places and wait to see who wins and who loses,
Trading edges exist because of divergences in market perceptions and realities that result from cognitive biases, They exist because economists are wrong in their belief that market players are rational, Market players are not rational, Chapterdiscussed how cognitive biases provide trading opportunities in a theoretical sense, This chapter will discuss that notion in further detail by using actual price data,
Support and Resistance
The concept of support and resistance is fundamental to almost all types of trading, Support and resistance is simply the tendency for prices not to exceed previous price levels, One can understand this concept most easily by examining its presence on a price chart,
Here is what I believe accounts for a trader's lack of success in trading commodities:
No plan: Many traders base their trades on hunches, rumor, guesses, and the belief that they know something about the future direction of prices.
Too much risk: Many otherwise excellent traders have been ruined because they incurred too much risk, I'm not talking aboutpercent orpercent more risk than is prudent, I have seen traders who trade at a level that isortimes more than I consider prudent even for aggressive trading,
Unrealistic expectations: Many new traders trade with too much risk because they have unrealistic expectations about how much they can earn and what sorts of returns they can achieve.
This is often also the reason new traders believe they can start trading on the basis of fundamental data they believe they are smart enough to 'beat' the market with little or no training and very little information.
The Myth of the Expert
The 'don't optimize' counsel is an effect of what my friends and I like to call the myth of the expert.
Unfortunately, in most fields the number of people who really understand what's going on is very limited, For every true expert, there are scores of pseudoexperts who are able to perform in the field, have assembled loads of knowledge, and in the eyes of those who are not experts are indistinguishable from the true experts.
These pseudoexperts can function but do not really understand the area in which they claim expertise,
True experts do not have rigid rules they understand what's going on, and so they do not need rigid rules,
Pseudoexperts, however, don't understand, and so they tend to look at what the experts are doing and copy it, They know what to do but not why it should be done, Therefore, they listen to the true experts and create rigid rules where none were intended,
One sure sign of a pseudoexpert is writing that is unclear and difficult to follow, Unclear writing comes from unclear thinking, A true expert will be able to explain complicated ideas in ways that are clear and easy to understand,
Another common characteristic of pseudoexperts is that they know how to apply complex processes and techniques and have been well trained but do not understand the limits of those techniques.
In trading, a good example would be someone who can perform complex statistical analyses of trades, runs a simulation that generates,trades, and then assumes that she can draw conclusions from those trades without regard for the fact that they might have been drawn from only two weeks of shortterm data.
These people can do the math but do not understand that the math does not matter if next week is radically different from the last two weeks.
Don't confuse experience with expertise or knowledge with wisdom,
Trader Effects
An observer effect is a concept from physics in which the act of measuring a phenomenon sometimes affects that phenomenon the observer disturbs the experiment by the act of observing.
A similar thing happens in trading: The act of trading itself can change the underlying market conditions on which the success of a trade is predicated.
I call this a trader effect, Anything that repeats with enough consistency is likely to be noticed by several market participants, Similarly, a strategy that has worked especially well in the recent past is likely to be noticed by many traders, However, if too many traders start to try to take advantage of a particular strategy, that strategy will cease working as well as it did previously.
Live By the Ego, Die By the Ego
This is the major reason why beginning traders are drawn to discretionary trading.
Discretionary trading feeds the ego it is trading that relies on one's judgment, in contrast with systematic trading, where trading decisions are made by using rules that specify exactly when and how much to buy and sell.
So when you use your judgment to trade and you win, the ego wins, You can then brag to your friends how you are the master of the markets,
I see this particular behavior constantly on online trading forumsespecially the broadbased ones that attract new traders, You regularly see posts from individuals bragging about how they bought just before a runup, or they have found the Holy Grail and have apercent accurate system, or they have been trading for three months and have madepercent.
They invariably have done this by trading with too much leverage, so they might have turned,into,however, they run a very high risk of losing that,because they are trading too aggressively.
A few months later, you may see the same traders post that they have blown up their account and lost everything, These individuals were trading to feed their egos, and as the saying goes, live by the ego, die by the ego,
Humble Pie, The Best Food for Traders
If you want to be a great trader, you must conquer your ego and develop humility.
Humility allows you to accept the future as something that is unknowable, Humility will keep you from trying to make predictions, Humility will keep you from taking it personally when a trade goes against you and you exit with a loss, Humility will let you embrace trading that is based on simple concepts because you won't have a need to know secrets so that you can feel special.
This book contains lots of ideas on backtesting methods to trade more methodically,
Suggested by my husband, I realized that I have absolutely no interest in this subject, officially abandoned. Are you serious about trading financial instruments stocks, options, futures, etc If so, this book should be in your reading list, You will learn a systematic and psychological approach to trading, Curtis M. Faith was one of the 'turtles' selected by Richard Dennis to learn how to trade, He claims to have the best returns among all the turtles, That may be correct for a year or two, He was the favorite student of Richard Dennis and so he got to trade a bigger account than the other turtles and thus earned a bigger bonus than the others.
What happened to him after the turtle program was terminated
He has been drifting here and there, He has not been able to trade successfully, though many other turtles setup their own shop and applied what they learnt from Dennis and his friend William Eckhardt.
His firm was investigated by SEC and he was arrested for some other crimes after a few years of publication of this book.
This book gives an inner view of the turtles program and tells about some of the basics of trading, Yes, his views are a bit biased but there is good introductory information for someone who is starting to trade,
This was a turtle who lost his way, When the discipline of trading under Richard Dennis was removed, he did not know how to handle himself, He was the youngest turtle in the program and it is quite evident that he was not able to handle his early success.
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