Turtle Trading Lessons From Michael Covel

Few legends in trading have been as enduring as that of the Turtles. The Turtles were traders in the 1980s trained in a trend-following methodology by Richard Dennis and William Eckhardt. The traders came from a variety of backgrounds; most had no background whatsoever in financial markets. Dennis championed the cause of nurture: he believed that great traders could be made. Eckhardt took the other side of the bet, and the Turtle experiment was on.

The Complete Turtle Trader, Michael Covel's engaging and well-written account of the Turtles, covers not only the experiment, but a second generation of Turtles who were inspired by the Dennis/Eckhardt vision. One of the most interesting segments of the book covers Salem Abraham, who by chance met one of the original Turtles, took a 180 degree life turn, and began his own highly successful fund. It's a powerful illustration that, though markets have changed since the 1980s, the dynamics of success have not.

Covel's book reads more like a piece of financial journalism than I expected, and I mean that as a compliment. It is this well-rounded perspective that makes "The Complete Turtle Trader" complete and a definitive contribution to the trading literature. He has clearly researched his topic and sources his quotes. He also casts a critical eye on his subjects, investigating why some Turtles found long-term success and why others didn't. A very enlightening portion of the book concerns Richard Dennis himself, the ending of the Turtle experiment, and the master's departure from his own trading rules and principles.

For those wanting access to the Turtle philosophy and rules, they're laid out clearly and unflinchingly. This is not a methodology for the faint-hearted, which is one reason so many Turtles and would-be Turtles have not stuck with it. Large drawdowns inevitably accompany the quest for large gains, and it's those large gains that ultimately provide trend following with its edge. Investors who place their money in funds simply don't want to see 20% of their money evaporate in a quarter. This inevitably leads money managers to refine (and ultimately eviscerate) the Turtle methodology.

Many of Covel's themes will ring true to readers of this blog, including the role of deliberative practice in the acquisition of trading expertise and the importance of emotional resilience and entrepreneurial spirit in sustaining a trading career. My impression, reading the book, is that Covel is under no illusions: the methodology, which provides the statistical edge in trading, is necessary but not sufficient for success. After all, the Turtles started with the same methods; some made it, others didn't. Covel's segment discussing what separated a successful Turtle, Jerry Parker, from his less successful peers is perhaps the most insightful portion of the book.

Because Covel so clearly lays out these ingredients of success, his book is relevant not just to trend traders, but to anyone who aspires to greatness in the markets. The message is clear: to win, the odds must be in your favor, and you must have the fortitude to keep playing, remain consistent, and compound your edge. That's a formula for success in any field of endeavor, which may be why the Turtle story finds universal appeal.

And, by the way, for readers who want to dig a little more into Turtle trading before purchasing Michael's book, I recommend his website. There are quite a few resources there, including articles on money management and trend following.

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