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Trend following
How does Turtle Trading work?
Turtle Trading
Chinese search often writes this as 海归交易法, a common misspelling of 海龟. It is the same set of public rules.
What it bets
After a new high or a new low breaks, the trend still has further to run.
How the rule is written
The public version has two systems. The short system buys a high of about 20 days and exits on a low of about 10 days. The long system buys a high of about 55 days and exits on a low of about 20 days. Shorts reverse that. N is measured from a window of true range. Each unit risks a small fraction of the account, then divides by N. After a profit, add at intervals of N, with a cap on the number of units. The protective exit sits several N on the other side of the entry price. On the short system, if the previous breakout of the same type made money, skip the next one.
When it fails
When there is no trend, breakouts fail again and again. Adding makes the winners larger, and it also makes the drawdown deeper when price falls back into the range.
Do not confuse it with
It enters on Donchian-style new highs and new lows, but it is not the Donchian channel itself. The four-week rule is always long or short. A turtle can be flat, and it has N, rules for adding, and a skip rule. Turtle Soup does the opposite: when the breakout fails, it takes the other side.