Trade Like 'The Turtles'

TheStreet.com
Trade Like 'The Turtles'
Wednesday June 13, 12:17 pm ET
ByCurtis Faith, Special to TheStreet.com

When publisher McGraw-Hill called last year to ask if I was interested in writing a book on my experience as a member of the legendary trading group later known as "The Turtles," I was a bit surprised, but pleased.

It had been more than two decades since I was among 23 people chosen by two trading geniuses, Richard Dennis and William Eckhardt, to help settle a bet: Are great traders born or groomed? We applied to newspaper advertisements from all walks of life, were chosen after interviews and trained. And we went on to great success -- over the course of four-and-a-half years, the Turtles earned an average rate of return of more than 80% a year.

Way of the Turtle is my story about that time, but it is not a comprehensive account. I was only 19 when I started, and I hope one of the other Turtles who was more in tune with the social interaction of the group can write that story. Instead, my book is about what I learned as a Turtle. I thought about what I could say that would be new, interesting, and innovative.

I didn't want to write a book that would quickly become stale, so I thought a strategic book that discussed timeless principles would be best. I had read many different books on trading over the years, but none that adequately explained why it is possible to make money trading. What are the underlying mechanisms that traders are able to capitalize on to buy and sell and make money? Why do they exist? I also found no satisfactory explanation for why markets are not efficient, except in very general terms.

So I wanted to write a book that addressed these questions and that provided the reasons behind the success of price-based trading approaches. I also thought that it would be fun to try to explain to others what I had learned from the Turtle program and over the last six years since I returned to trading, after an almost 20-year hiatus.

In preparation for writing Way of the Turtle, I read a number of trading books recommended by other traders I respected. In doing this, I found there is a lot of tactical information about trading, but very little in the way of high-level guidance or strategy. Most books on trading are very detailed, nuts and bolts explanations of what to do, with not much explanation of why -- and virtually no explanation for the market movements themselves.

But the most important reason I wanted to write a book about the Turtle experience is because I wanted the world of trading to know how brilliant Richard Dennis and William Eckhardt actually are -- how advanced their thinking was in 1983 when they taught us, how valid their simple trading principles still are, how mindful they were of the risks of trading.

In the years that followed the Turtle program, some have gotten the impression that Rich's success was perhaps a fluke, as he has not yet had such great success trading other people's money. I wanted the trading world to share my belief that Richard Dennis and William Eckhardt were, and still are, some of the top thinkers in the world on trading.

I like a challenge, so I thought it would be fun to try and write a book that would have something for everyone. In Way of the Turtle, I try to provide new ideas for hardcore system traders, concepts and theory that would be useful for short-term and discretionary traders, explanations for market behavior that would be interesting for the general finance reader and an interesting story for the general business reader. Very few books have been able to appeal to such a diverse audience, so I knew it would be tough to write. And it was.

Finally, in the 20 years of my life after the Turtle program ended and I stopped trading, I never ceased thinking like a trader. I have found that many of the approaches and perspectives of a great trader are also valuable in real life. So I also wanted to make sure that I covered the reasons why trading ideas translate to other spheres of human endeavor. I thought this would also make the book interesting to a wider audience, not just hardcore traders.

Over these 20 years there has been a lot of research in the field of behavioral psychology, which was very useful in my own understanding of markets and trading. Scientists have discovered many cognitive biases that cause most of us to make wrong decisions whenever there is no clear right or wrong answer to a question. This affects decisions in business, personal relationships and marriage -- every area that is important for living a full life. Since I wasn't trading, I have had a lot of time to think about and note how trading-style thinking helps one make better decisions, and I had built up a small library of analogies and examples that I wanted to share with my readers.

I have also found that the act of writing is very good for clarifying and materializing my abstract and fuzzy thoughts. It is also good for bringing to the conscious mind that which has served only to guide through a "gut" or subjective impression. So I knew that the act of writing the book would improve my own trading and help me clarify my own thinking. This certainly proved true. In fact, I believe that I learned more by writing Way of the Turtle than I did while trading as a Turtle.

I enjoy interacting with other traders, so if you get a chance to read my book, please consider joining me at my blog or at the trading forum I moderate.