What Can You Learn From "The Turtle" Traders?
Can you learn to trade successfully? Or, are some people just born with the right personality or luck to make it big in the markets?
It's a nature/nurture question, of course.
In the early 1970's, commodity trader Richard Dennis embarked on a now legendary journey to find out.
Dennis made his mark in the scrappy open-outcry trading pits which were a bastion of true capitalism. The trading pits were a place where one could get a job as a runner after graduating from high school and become a multi-millionaire a few years later. No MBA required.
In the Chicago trading pits, size, brawn, stamina and the ability to do math quickly in one's head contributed to success. Risk-taking "local" traders, or those buying and selling for their own accounts, won big and lost big too.
At the age of 17, Dennis started out as a runner (passing orders from phone clerks to traders inside the pit) at the Chicago Mercantile Exchange. From there, he borrowed money and began trading for his own account in the early 1970's. He reportedly turned an initial stake of $400 into roughly a $200 million fortune over an 18-year period. Really.
As Dennis had more and more success, he spoke about his belief that successful trading could be taught. He bumped into resistance with his partner William Eckhardt on that point. Eckhardt believed that Dennis had a special talent or gift that allowed him to excel at trading.
As some traders are apt to do, Dennis proposed a bet.
In order to settle the long-running debate between the two, Dennis suggested they find out with real people. Dennis decided to advertise for the position, hire a team of traders and teach them his trading rules.
In 1983 and 1984, Dennis placed advertisements for the position of "Commodity Futures Trader" in a number of major publications. About 1000 people sent in applications. Dennis hired 13 in 1984 and another 10 in 1985.
After two weeks of classroom work ended, Dennis gave each of the students $1 million of his own money to trade.
He boasted: "We are going to grow traders just like they grow turtles in Singapore." Dennis had recently returned from Singapore and had visited a turtle breeding farm there. The name Turtles stuck.
How did the turtle traders do?
Dennis won the bet. A few of the traders were dropped from the program and few others left to trade for themselves. But, a 1989 Wall Street Journal analysis found that the 14 traders who were trading public funds earned an astounding average annual compound rate of return of 80% over a 4 1/2 year period.
Richard Dennis ultimately proved: trading is a skill that can be taught.
If you've been disappointed in your trading results, or frustrated by a lack of consistent profits, take heart in the lesson of the Turtles.
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