Turtle Trend Following with ATR Sizing, Breakouts, and Stops

Summary

This article outlines a Turtle-style trend-following system for stocks. It frames a complete trading plan around market selection, position size, entry, loss exits, profitable exits, and trade rules. Position size is tied to account equity and the 20-day average true range (ATR), so more volatile stocks receive fewer shares. The entry rules use Donchian channel breakouts: a shorter lookback system and a longer lookback system, with a rule to bypass some short-system signals after a profitable prior breakout and a longer-lookback fallback.

The article also describes adding units at half-ATR price intervals, capping exposure at four units, and managing risk with stops around two ATR from entry. It gives a numerical stock example and proposes reducing account scale after losses and increasing it after gains. A tighter stop-and-reentry alternative is mentioned, alongside shorter channel exits for closing positions. These are rule descriptions, not evidence of tested performance. The suggested sizing and exposure limits are presented in a domestic-stock context; the text does not address transaction costs, liquidity, or the effects of adapting the rules to other markets.

Key ideas

• The system organizes trading into market selection, sizing, entries, exits, and execution rules.
• Position size is inversely proportional to a stock’s 20-day ATR and scales with account equity.
• Entries use shorter and longer Donchian channel breakouts, with a fallback signal for the shorter system.
• Positions can be built in half-ATR increments up to four units, with ATR-based protective stops.
• The article gives operational rules but provides no performance testing or cost analysis.

Tags

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