Way of the turtle: the secret methods of legendary traders PDF
Preview Way of the turtle: the secret methods of legendary traders
WAY OFTHE TURTLE CURTIS M. FAITH McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2007 by Curtis M. Faith. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publica- tion may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. 0-07-150946-1 The material in this eBook also appears in the print version of this title: 0-07-148664-X. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps. 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THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUD- ING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPER- LINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MER- CHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any infor- mation accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise. DOI: 10.1036/007148664X To Richard Dennis, who made it all possible, and to Juliet Mantiply, my first muse; may our paths cross again some day. This page intentionally left blank A C K NOW L E D G M E N T S Although I have learned from almost everyone I have interacted with over the years, there are a few people I want to thank espe- cially for their contributions to Way of the Turtle. First and foremost, I am greatly indebted to Richard Dennis, who had the balls to propose and execute the Turtle idea. I am also grate- ful for his confidence in me and my abilities when I was only 19 years of age. Richard is one of the modern era’s truly great traders. He is also one of the most courageous. He is a thoughtful, honest, and genuine person. I am honored to have learned from him. Second, I want to thank Rotchy Barker, who was my first trading mentor. He took me into his home and taught me for no other reason than that he believed in me. Rotchy is the genuine article: a very gen- erous and honest man and an excellent trader. I learned much of value from Rotchy, not the least of which is that all successful people owe their success to the help of others. I hope my own life honors that spirit. Third, I want to thank George Arndt for having the crazy notion that 17-year-old kids could program computers long before that was a well- known idea. But most of all, he gets credit for instilling in me his pas- sion for trading and for persuading me to apply for the position with Richard Dennis. • v • Copyright © 2007 by Curtis M. Faith. Click here for terms of use. vi • Acknowledgments These three men helped set me down the path that became the Tur- tle legend and provided the basis for this book. Many others have helped me in the writing of this book. Dalia Al-Othman, my dulce de leche and dear friend, helped me get my prose in decent shape for submission to my editor. She was also there helping me along and encouraging me whenever I was discour- aged. Thank you, Dalia. Jeanne Glasser, my editor, was terrific fun to work with. She is largely responsible for the readability of this manuscript. The story flows and the words come together because of Jeanne. The book would not have been finished without her persistent guidance and nudging. Thank you, Jeanne. Tim Arnold is my longtime friend and business associate; and the guy who now runs Trading Blox, LLC, the trading software company I founded a few years back. Writing this book has taken away from the time I normally would have committed to that business. Tim patiently filled in the gaps I created by being dedicated to writing this book over the last six months. Without Tim’s help it would have been impossible to write it. Thank you, Tim. There are few people in the world who do as much thinking about trading and as much sharing of their knowledge as Mark Johnson, who runs MGJ Capital Management, LLC. Mark has contributed an amaz- ing number of postings to online discussion groups and forums over the last several years that have made me think. Many of the changes in my own thinking started with a seed planted by Mark, a seed that made me challenge what I had been doing. Mark first gave me the idea behind RAR% and much of what became R-cubed. Mark created the basis for the ATR channel breakout system when he published his PGO system a few years back. Mark also spent time reviewing this man- uscript and gave me important and detailed feedback, including point- Acknowledgments • vii ing out assumptions I had made that might not be obvious to new read- ers. The book is much better because of his suggestions. Thank you, Mark. Tom Rollinger came to me several years back and asked me to teach him how to trade. I was impressed with his single-minded pursuit of the goal of being a great trader. His determination was the impetus that got me to return to trading after a 15-year hiatus. I would not be writ- ing this book had he not come to me. Thank you, Tom. I would also like to thank everyone who took the time to read early copies of the manuscript and give me honest feedback: Brett Steenbarger, a trader and author who runs a trading blog at http://traderfeed .blogspot.com; Mike Taylor, who runs the blog at http://taylortree.com; David Bromley, who runs the trading education company Modus Trad- ing (http://www.modustrading.com); John Knott; Anthony Garner; and Jennifer Scofield. Finally, I want to thank Van Tharp and Melita Hunt for recom- mending me to McGraw-Hill as a potential new author. And Van for taking the time out of his very busy schedule to read my book on short notice, for his candid feedback, and for writing a very nice foreword. This means a lot to me. Thank you, Van and Melita. This page intentionally left blank For more information about this title, click here C O N T E N T S Acknowledgments v Foreword xi Preface xvii Introduction xix one Risk Junkies 1 two Taming the Turtle Mind 13 three The First $2 Million is the Toughest 29 four Think Like a Turtle 47 five Trading with an Edge 63 six Falling Off the Edge 75 seven By What Measure? 85 eight Risk and Money Management 109 nine Turtle-Style Building Blocks 123 ten Turtle-Style Trading: Step by Step 131 eleven Lies, Damn Lies, and Backtests 151 twelve On Solid Ground 179 thirteen Bulletproof Systems 207 fourteen Mastering Your Demons 223 • ix •
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