The Bet
"We're going to raise traders like they raise turtles in Singapore." That is what one of the world's famous commodities speculators, Richard Dennis, said to his good friend William Eckhardt, an equally successful trader. Back in 1983, a debate that had been brewing between the pair took a serious turn when standing in a turtle farm in Singapore. The now-legendary bet was made between the two regarding the age-old argument of nature versus nurture, and one's ability to trade. Dennis strongly believed that anyone with the right mentoring and nurturing could be transformed into a formidable trader, whereas Eckhardt believed that it was down to nature: one was either born to trade, or not.
The Turtles
And so the experiment began. Large adverts were put in The Wall Street Journal inviting anyone with an interest in trading to apply to become a mentee under the guidance of Dennis. The ad specified that Dennis would teach the group his trading methods and give each mentee a trading account loaded with a million dollars. After a rigorous intelligence and aptitude test and an interview session with both traders, applicants were whittled down from over 1000 to just 13. The Turtles were born.
Who Is Richard Dennis?
Dennis was known by the nickname "The Prince of the Pits" -- the pits being the chaotic trading floor that traders call "home". He had earned this by turning a few thousand dollars into several hundred million by his mid-thirties. Dennis put his own money on the line during the experiment, making a clear statement that he not only fully understood the reasons behind his phenomenal success, but that he was able to pass this information on, turning the recipient into a formidable trader. After an initial two-week training period where they were trained in Dennis' strategies and methodology, the Turtles went on to make an average return of over 80 percent a year over the next four-and-a-half years.
What Was Needed To Be A Turtle?
The mentees selected had varying levels of intelligence and trading experience. Some were even complete novices like Curtis Faith, who went on to be the most successful Turtle. They were all, however, screened based on two key areas: firstly to be able to understand the markets as a general trading requirement, and secondly all had the common trait of a good knowledge of probability mathematics, gaming theory and strategy. Careers amongst the Turtles ranged from a blackjack and backgammon player to an accountant.
Why These Traits?
The relevance of this becomes clear when one understands the theory behind market movement and long-term trading success. In 1983, just as is the case today and something I understand very well, the Turtles learned that any single moment in the market is random but over a period of time patterns in the market repeat themselves. Dennis, in the two-week training period, would have explained his understanding of market movement. Being mentored by someone with such unrivaled success should, in theory, have made it easier to absorb his strategies and knowledge. Blind faith should have been placed in him, to put it simply.
Surprising Results
It may then come as a surprise that after the initial one-month trial period, during which the traders put into practice the knowledge they had been given, they produced a varying set of results. From the very early stages, Faith showed an ability to follow rules without any form of deviation, but some of the Turtles found following Dennis' rules a real challenge. What is so elusive about mastering trading that, after one month of trial trading, such varying results were produced?
Challenges Of The Human Thought Process
As Curtis Faith explains in his book in more detail, the answer lies in "trading psychology" and the irrational thought innate in the decision-making process of each individual. Hope, fear, greed and disappointment all play their part in the failure of the vast majority who turn to trading. A classic mistake made by rookies is to let losing trades run, in the hope of clawing back what has been taken by the market, and to get out early from winning trades, in fear of losing profits to the market. The Turtles were made to understand that these human characteristics influenced trading and market movement, and were given the strategies to repeatedly capitalize on them.
Why Were Some Turtles Less Successful?
The answer lies in the fact that conceptually, trading is easy to understand, but putting what you have learned into action is where the challenge lies. This is where the different members of the Turtles came unstuck producing varying results. Despite all the Turtles being given the same training, the aforementioned human traits such as fear played a part when a trade had to be put on. What separated Curtis Faith was his ability to keep it simple and follow the rules.
Did Dennis Win The Bet?
Curtis Faith says it was a draw and I partly agree with him. Dennis specified that he was out to prove that anyone could learn to be a trader and they just needed to be taught his trading strategy. But, as we now know, success varied amongst the Turtles. Some, with little or no trading experience, went on to become hugely successful traders while others, with losing accounts, were dropped from the project.
The Turtle System and The Traders' Cosmos
The market moves in three directions. Up when there is strength in the market. Down when the sellers have control. And sideways when there is a stalemate between the Buyers and the Sellers. The Turtle System took advantage of when the market was most profitable, that is when it was moving up or down, or in trading terms when the market was in a trend. Like Dennis, we at The Traders' Cosmos believe that trading should be kept simple. We also believe that you need to have the right strategies for the right market conditions. Catching trends in today's market is much harder as they simply don't trend as much, so the modern day trader has had to adapt to much more challenging market conditions. That does not mean to say one cannot be as successful as the Turtles. You just need the right mentor!
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