The Turtle Trading System: Breakouts, ATR Sizing, Pyramiding, and Exits

Summary

This article outlines a systematic trend-following approach commonly called the Turtle method. It describes choosing liquid markets, using average true range (ATR) as a volatility measure for position sizing, and entering on Donchian channel breakouts. The short-term entry rule uses a 20-day breakout, with a filter based on whether the previous breakout was profitable; a longer-term system uses a 55-day breakout. Positions may be increased as price advances by half an ATR, while a two-ATR stop is moved as units are added. Exit rules use opposing 10-day or 20-day channel breaks, depending on the system.

The article also stresses disciplined execution, probabilistic thinking, and risk control. It gives a historical account of the original traders and an illustrative position example, but does not provide a reproducible backtest for the implementation described. Some details appear inconsistent or ambiguous, including the sizing formula and the number of additions, and the historical performance claim is not substantiated within the article. Readers should treat its parameters as a description to verify, not validated results.

Key ideas

• The system enters liquid markets when prices break beyond Donchian channel highs or lows.
• ATR is used to relate position size and stop distance to market volatility.
• The rules describe adding units as the market moves favorably and raising stops as exposure grows.
• Channel breaks in the opposite direction provide separate exit rules for short and longer horizons.
• The article advocates systematic execution but provides no reproducible backtest and contains some unclear details.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.