Research Article #32 - Turtle Trading: Strategy Performance in Crypto
Research Article #32 - Turtle Trading: Strategy Performance in Crypto
Classical Trend-Following in Cryptocurrencies
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Last week I wrote a thread on Richard Dennis, the creator of the Turtle Traders program.
Thread Link: https://x.com/pedma7/status/1774428942100750629
People seem to have enjoyed it, and I decided to share with you the backtest of this trading strategy applied to the cryptocurrencies market.
The strategy is fairly straightforward, but it can get complicated in the operational side.
A little back story on Richard Dennis.
Richard was a very famous trader from the early 70’s.
He borrowed $1,600 to trade, and by the age of 26, he was already a millionaire.
Throughout his career, he reportedly earned 100’s of millions of dollars .
He had a partner called William Eckhardt, with whom he had a philosophical disagreement.
Richard believed that he could teach trading.
Regardless if people had experience trading or not.
So he did.
He posted an ad on the newspaper, and chose a small group of people, with a diverse background to be his students.
He called them the Turtle Traders.
The turtles went on to earn an estimated amount of over $100,000,000 through the course of the program.
He proved that his theory was correct.
Trading indeed could be taught.
To this day still many use his strategy, but in different contexts and with a few modifications.
Let’s delve into the results!
Index
Introduction
Index
Strategy’s Thesis
Strategy’s Performance and Results
Strategy’s Parameters
Python Code Section
Sponsor Of Today’s Article
Strategy’s Thesis
Trend following is one of the most straightforward systematic strategies to understand and implement.
A pure macro trend-following strategy isn’t that easy to implement, because its trading dozens, sometimes hundreds of global markets at the same time.
That’s pretty hard to manage. But it isn’t the strategy that it’s complex, it’s the operational side.
Here we will only be applying it to crypto.
The core assumption of the strategy is that markets trend, and that this “anomaly” can be exploited.
Many theorists argue about its validity, but we are not here to debate philosophical concepts, we are practitioners.
Once academics agree that something is “reliable”, it probably doesn’t work anymore.
We have a few components that are important in trend-following strategies:
Asset Selection
Ranking
Entry Signal
Exit Signal
Stop Loss
Trailing Methodology
If you’re applying a pure trend-following model, you want to trade as many uncorrelated markets as possible.
This is because of two things:
We never know where trends come from. This means that you want to be trading everything you can get your hands on, and eventually, you’ll hit that big trade that really boosts your returns. (Example is the recent COCOA trade)
If you’re trading only one market, the returns are most likely all correlated. Take the example of crypto. Sure you can diversify between individual coins, and you avoid individual risks, but at the end of the day, they will all be going up when BTC is going up, and down when BTC is down.
Strategy’s Performance and Results
