Richard Dennis – The Turtle Trader – Trend Following, Trading Strategies, and Insights

Richard Dennis is one of the world’s most famous traders, mostly because of the Turtle Experiment. In this article, we look at Dennis’ life and trading career, and additionally, we explain what the Turtle Experiment was. We end the article by listing a few of the trading lessons and quotes from Richard Dennis. Dennis was also interviewed by Jack Schwager in Market Wizard.

There are many stories of veteran traders who experienced boom and bust in the financial markets, but the incredible story of Richard Dennis, an astonishingly rich genius and pioneer of commodity trading, is outstanding. Richard started early and gradually traded himself to the height of his career with astute management skills and clear strategies.

Who is Richard Dennis?

Born in January 1949, Richard Dennis became an order runner on the Chicago Mercantile Exchange trading floor in 1966, at the age of 17 years. When he was only 23 years old, he reportedly borrowed $1,600 and turned it into $200 million in about ten years of trading commodities. By the time he was 26 years old, he was already a millionaire trader.

Dennis earned a bachelor’s degree in philosophy from DePaul University, then accepted a scholarship for graduate study in philosophy at Tulane University, but changed his mind and returned to trading.

Dennis made significant profits when he bought successively new weekly and monthly highs in the trending inflationary markets of the 1970s, an era of repeated crop failures and the “Great Russian Grain Robbery” of 1972. Those riches didn’t come easy; Dennis was notorious for experiencing intense amounts of volatility.

Richard Dennis is popularly known as the “Prince of the Pit.” Following the stock market crash in 1987, he incurred significant losses, making him retire for many years.

During this period, Dennis was busy managing pools of capital for others in the markets for a while, but he stopped abruptly in the spring of 1988 after his clients suffered heavy losses. He reportedly lost about $10 million during the Black Monday crash of 1987 and also went on to lose approximately $50 million in 1987–1988. He also managed funds for some time in the mid and late 1990s, closing these operations after losses in the summer of 2000.

Dennis held positions for more extended periods, unlike many scalpers that would open and close during the trading day. He also has some publishing credits as he published various articles in The New York Times, The Wall Street Journal, and the Chicago Tribune.

What is Richard Dennis known for?

Richard Dennis is mainly known for the Turtle Trader experiment in the 1980s. In a bet against William Eckhardt, Dennis bet that anyone could learn successful trading. Dennis won the bet.

This is what the bet was about, and is later referred to as Turtle Traders:

What is the Turtle Trading Experiment, and how was Dennis involved? (Turtle Traders)

The Turtle Trading Experiment was a trading experiment conducted by Richard Dennis and William Eckhardt in the 1980s. They recruited and trained a group of novices, known as the “Turtles,” to trade using a set of rules and trading techniques. The experiment aimed to test whether successful trading could be taught.

You could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline.

While Dennis is known for making and losing a lot of money, he’s also known for something else — the Turtle experiment.

The above quote made Richard Dennis famous because he made a bet with a fellow trader. Dennis believed that successful trading could be taught. To settle a debate on that point with William Eckhardt, a friend and fellow trader, he took a handful of men and women from obscurity and taught them to trade futures in two batches in 1984 and 1985. Can you train someone “from the street” to become a good trader?

Richard Dennis argued you could. However, they screened based on personality tests for traders before hiring someone. The first group of 1984 only had two weeks of training. The second-year they found out they could manage only one week of training. 23 traders in total were hired, and 20 of them went on to do well.

The result was the famous Turtle Experiment which Dennis won. According to a former student, these so-called Turtle Traders went on to earn profits of $175 million in 4 years, or an 80% compounded rate of return.

One of the students was Curtis Faith. He was very successful and he published a book about mechanical trading and trend-following in 2007. We strongly recommend his book, called The Way Of The Turtle. We regard it as one of the best trading books out there.

What were the key principles of the Turtle Trading strategy?

The key principle of the Turtle Trading strategy is adhering strictly to mechanical trading rules based on trend-following strategies.

It was all about trend following in certain commodities and forex (and also stock indices). In addition, the Turtle Traders were taught to cut position size during losing periods and to pyramid aggressively by up to a third or a half of total exposure.

However, only 24% of total capital would be exposed at any time. This type of trading system will generate losses in periods when the market is range-bound, often for months at a time, and profits during large market moves. We recommend reading our article about why trend-following works:

You might wonder why they were called Turtle Traders. Dennis said that “we are going to grow traders just like they grow turtles in Singapore”.

What were the outcomes of the Turtle Trading Experiment?

The outcome of the Turtle Trading Experiment was that successful trading can be taught. Richard Dennis won the best, and many Turtle Traders became successful money managers and traders.

What other ventures or projects was Richard Dennis involved in?

Richard Dennis has been involved in C2 Capital Management, interviewed in Jack Schwager’s Market Wizard book, done philanthropy, and has been involved in political activism with his strong libertarian views.

What were some of the challenges or controversies he faced during Richard Dennis career?

Richard Dennis, a commodities trader, faced challenges and controversies throughout his career, notably the “Turtle Traders” experiment, criticized for its secretive nature and potential exploitation of novice traders. His aggressive trading strategies and unconventional methods also sparked debate within the financial community regarding risk management and market manipulatio

He has been accused of market manipulation in the 1980s, but he was never formally convicted. Another controversy is that several of his hedge funds have underperformed and later closed down. This has raised questions about his adaptability and consistency.

What is Richard Dennis’s legacy?

Richard Dennis’s legacy lies in his pioneering work in commodity trading and the development of the Turtle Trading experiment. Through this program, he proved that trading skills could be taught, challenging conventional wisdom. His legacy continues to inspire traders worldwide, emphasizing the importance of disciplined strategy and risk management.

His main legacy is his contributions toward systemized and automated trading strategies based on strict trading rules. He has proved that successful trading can be taught, distinct from luck, and not to mention intuition (trading rules trump intuition).

What lessons can we learn from Richard Dennis’s life and career?

The main lessons we can learn from Richard Dennis’ life and career is that a systematic approach to trading can be learned and that such an approach is also better than an intuitive one.

He has also proven that mentorship is extremely valuable. You are much more likely to succeed if you have a successful mentor. However, this is based on the fact that you have the mental strength to pull the trigger on every trading signal, but anyone who has traded knows that this is extremely difficult. Can you pull the trigger after seven losses in a row? Very few can and eventually abandon a mechanical and systematic approach to trading.

What is the Turtle Experiment, and how did it contribute to Richard Dennis’ legacy?

This FAQ explains the Turtle Experiment initiated by Richard Dennis, detailing the bet he made with William Eckhardt to teach individuals to become successful traders. It also touches upon the screening process and the remarkable success of the Turtle Traders.

What were some of the key lessons from Richard Dennis in trading?

Highlighting wisdom from Richard Dennis, this FAQ compiles quotes that provide insights into his trading philosophy. It covers topics such as expectations in the trading business, the importance of consistency and discipline, and the need to trade small and learn from mistakes.

How did the Turtle Traders perform, and what is the significance of trend following in their strategy?

This FAQ provides information on the performance of Turtle Traders, mentioning their profits of $175 million in four years and an 80% compounded rate of return. It also briefly explains the Turtle trading strategy focused on trend following.

Quotes from Richard Dennis

Here are some quotes from Richard Dennis:

You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do.

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To find the things that we were looking for, we could choose from intelligent or extremely intelligent people. We picked the ones with extreme intelligence just because they were available.

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I always said you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline.

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Professional traders may do some very intelligent things, but they have a tendency not to think systematically about what they are doing.

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Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes.

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Demonstrably, commodities are trending and, arguably, stocks are random.

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There will come a day when easily discovered and lightly conceived trend-following systems no longer work. It’s going to be harder to develop good systems.

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