So if you can teach someone to trade, why is it that all the turtles didn’t succeed, let alone have returns similar to one another?
Michael Covel, author of “The Complete Turtle Trader”, gives an explanation. “Some Turtles like Jerry Parker have chosen a path of less risk and less return. Some like Tom Shanks have stayed true to their higher risk/reward roots. Even though they have made different choices they are BOTH still trend following Turtle traders!”
Well, this might explain some variation in success. Sure, different approaches with money management and leverage will produce different equity curves, but what about those that lost money using the same program?
For example, there is speculation that Curtis Faith has no public track record for the last 20 years and may have even blown up Acceleration Capital. It appears that Curtis, even as a Turtle had his own interpretation of the Turtle rules. Covel in “The Complete Turtle Trader” says “Faith apparently traded much larger and made more money than all of the other Turtles. Mike Cavallo (another turtle) thought Faith had exceeded what they were allowed to trade.”
In fact, the message from all the other turtles was “Faith's trading didn't reflect what they'd been taught” and there was a good chance he was risking so much that he could ultimately be ruined (as in mathematical risk of ruin).”
Even Curtis himself mentioned in his book “The Way of the Turtle”, that most of the Turtles didn’t last long after the program. But why is that?
I think part of the answer lies in what Mark Douglas, in his workshop “How to Become a Disciplined Trader”, referred to as the Invisible Barriers. These invisible barriers are the reason great traders go broke. They are the reason that no matter how much state of the art software is available, 90% of the people who trade commodities lose money. These barriers are in effect, ourselves, and all the baggage that we carry through the airport of trading. Like Anais Nin said, “We don't see things as they are, we see things as we are.” So, I guess we better work more on seeing things as they really are.
Douglas points out that a unique perspective is necessary beyond the methodology of a good trading plan. The trader has to set up a mental framework to manage the methodology in the “real world” or he will be “floating in a sea of endless possibilities, at the mercy of his own unrestrained impulses, often without the slightest clue of what to do next or completely immobilized even when he does know what to do.”
Good traders build this framework in anticipation of these invisible barriers, largely because what we learned to be successful in day to day life does not apply to trading. Somehow we have to learn to protect against the unexpected events…. even if the event is dealing with our own irrational behavior.
Douglas says that “trading is the kind of endeavor where you either get it, or you don’t. If you don’t get it doesn’t matter what trading systems or high tech equipment you have, or how much time you spend doing market analysis. What will make a difference is learning how to change your perspective to include some fundamentally different beliefs.”
So, the trick is to build this framework that will help break through the barriers, before you go broke. I don’t know about you, but it took me a few times to get this part right.
In part 3, I will explore the defining factor that separates the consistent winners from everyone else.
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