Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders

Faith was one of the traders recruited in 1983 when Richard Dennis bet William Eckhardt that trading could be taught to novices. Dennis trained two groups over two weeks, gave them capital, and the experiment became known as the Turtles. Faith wrote this account of the rules and the reasoning behind them after the original agreement not to disclose them had expired.

The method is trend following on futures. Entry is on a breakout, meaning a price exceeding the highest high of a defined lookback period. Exit is on an opposite breakout of a shorter period, or on a stop placed at a multiple of recent volatility. Position size is set so that a one-unit adverse move in volatility terms costs a fixed small percentage of equity, which means positions in volatile markets are smaller. Faith presents the volatility measure, which the Turtles called N and which is close to average true range, as the central innovation, because it normalises risk across markets with different characteristics. Diversification across many uncorrelated futures markets supplies the rest.

The conceptual arguments matter more than the parameters. Faith argues that the method produces losses on the large majority of trades and makes its money on a small number of large trends, that this distribution is psychologically intolerable for most people, and that the Turtles who failed did so by not following the rules rather than by having worse rules. He also covers expectancy, drawdown, risk of ruin, and the ways backtests mislead through survivorship bias and overfitting.

The published rules have been public for years and simple breakout systems have performed poorly since, which is the obvious objection: a mechanical system disclosed to everyone loses its edge. Faith's account of his own trading record has also been disputed by other participants. The value now is in the risk management and position sizing framework rather than in the entry signals.