ForexSpirit

Curtis Faith is one of the original Turtles. He was a member of the first group of people to take part in a unique trading program. This trading program was the result of a bet between Richard Dennis and William Eckhardt. Could trading be taught? Richard Dennis was willing to put his own money on the line to prove that it could be, and Curtis Faith was one of the lucky few who got to test the theory and trade that money.

Way of the Turtle recounts how Curtis found out about the challenge, how he got accepted, what the training was actually like and how he faired putting that training to practice.

There are three areas that I found to be particularly interesting and insightful in the book. The first is how Curtis links identifiable market traits such as support and resistance areas and market patterns with our own human emotion and irrational thinking. Our own primitive biology seems to dogidly get in the way of our trading. He looks at numerous cognitive biases, which are distortions in the way we perceive reality, and how they result in the repeatable market patterns that are easily identifiable on a chart.

The second area of interest was the four lessons that Curtis learnt from the Turtle program about how to be a profitable trader:
1/ Trade with an edge
2/ Manage risk
3/ Be consistent
4/ Keep it simple

The final jewel contained in the book is found in the epilogue. You have to take risks to make any substantial forward progress in your life. Don’t be afraid to try new things. Travel the path least followed.

Curtis Faith is very much a mechanical trader. The Turtle trading system was mechanical; it had specific rules for entering and exiting trades, on position sizing and money management. If you’re a systematic trader then you will get a lot out of the parts of the book that cover this area. As a purely discretionary trader I was more interested in some of the new performance measurements that Curtis introduces, along with his views on why mechanical trading is better than discretionary trading.

The Regressed Annual Return (RAR%) and R-Cubed (Robust risk/reward ratio) are both very interesting new ways of calculating the robustness of a trading system, and I hope to apply them to my own trading results in the near future to see how they hold up. They certainly seem more suitable for trading than the Sharpe ratio, which was originally devised to compare mutual funds.

Curtis sees the ego as being the downfall of many a discretionary trader. The ego wants to be right; it hates having to deal with losing trades. The ego wants to correctly predict the future; it just can’t handle the reality that we have no way of knowing what the future brings. The ego wants to know all the secrets; having a simple system isn’t enough, there must be some other piece of information or indicator that we can get hold of to make our trading system better. The ego fights against uncertainty. The ego wants you to be special. To know something that everyone else doesn’t.

If your ego is in control then all the cognitive biases that have been identified in the book are able to take control. You succumb to your own irrational thinking.

Becoming a successful, profitable discretionary trader means reigning in your ego. You have to constantly keep it in check. Keep yourself humble. Accept that you are never going to know what the market does next. Put together a trading system that has an edge you have identified. Know when to take your losses. Be ruthless in taking those losses when the time comes. Be consistent. Apply your trading plan to the letter. Keep it simple. Simple trading systems hold up better in the long run. Complicated systems can be too reliant on market conditions, so if the market changes drastically the complicated system will have a harder time adapting than a simple one.

So did the Turtle program definitively answer if trading can be taught? In one way it did, in that trading can be taught to the right person. Curtis Faith and the other select few people that made up the original Turtle trading program were hand picked from thousands of applicants. Curtis even relates the danger of basing any trading system conclusions on a small sample size (of trades), so in the same vein, it would not be wise to make too many concrete conclusions from such a small group of people. Even so, not all of the hand picked people to be part of the Turtle program were successful. It seems reasonable to say that trading can be taught, but that not everyone is going to end up being a successful trader.

If you’d like to read two sections of the Way of the Turtle for free, then you can find them on Curtis Faith’s trading blog, cunningly titled Way of the Turtle.