Richard Dennis, a master of trend following

Richard is one of the most famous traders in the World. He was known as the “Prince of the pit”. He was the creator of the “turtle traders”.

Dennis is famous for borrowing 1600 $ at the beginning of the seventies and making 200 million $ ten years later.

Richard Dennis turtle trading

His idea was to buy very trendy stocks. By the time he was in the market, the seventies, most bullish assets were commodities.

It is said that Dennis bought when the asset was making new weekly and monthly highs and that he was pyramiding his profits. That means he was compounding his capital, just as any great trader would do.

By that time, it seems that just with a very simple trend technique you could make money in the markets.

That was true then and is still true now.

Richard Dennis day trader

Contrary to many traders of his time (and from today), who tried day trading, Dennis looked for moves that lasted weeks and months and would let his profits run with the trend. That is what a true trader would do, and forget completely about day trading. Dennis understood it very quickly.

Why looking for a 1% move when there is a big trend that lasts months and years?

It is a big trend what you have to search for, and that is done with long term charts. Not with 5 and 15 minutes ones.

The Turtle Traders experiment

Dennis thought that trading could be taught.

He thought that you did not need to be born as a trader and that someone with good numeral skills could be taught to be a good trader.

After a long debate with a friend, the famous trader William Eckhardt, they decided to put their ideas into practice, so the turtle traders experiment was born.

Dennis taught some traders for some weeks.

The technique was easy and simple; you had to buy when there was a breakout and sell when the breakout was in the short side.


Richard Dennis system

The only thing you needed were simple money management ideas like reducing your trading size when you are losing.

Dennis chose the students he liked most and gave them some capital to trade during some years. It is said that those traders made 175 million $ of profits.

The problem with Dennis method is that it was a great result in the years before 1986m and not very good after that.

Dennis apparently stopped trading in 1987 after the crash. However, some Dennis students went on with their own variations of the method and did well.

An interesting fact is that Dennis made a lot of money with simple techniques of trend following and money management and that his trades lasted for quite a long time. He did not need to do day trading with 5 minutes and 1 hour charts.

The only thing you need is to ride the major trend and use long term charts. That is it.

P.S. This is a personal translation from my spanish blog

Thanks for reading and sharing.