Hurst Cycles Trading Software - Accurately Forecast Nifty and Stock Cycles

Monday, January 19, 2009

Who were the Turtles?

In mid-1983 famous commodities trader Richard Dennis was having an ongoing dispute with his long-time friend Bill Eckhardt about whether great traders were born or made. Dennis believed that he could teach people to become great traders. Eckhardt thought genetics were the determining factor.

In order to settle the matter, Dennis suggested that they recruit and train some traders and give them actual accounts to trade to see which one of them was correct.

They took out a large ad advertising positions for trading apprentices in Barron's, the Wall Street Journal and the New York Times. The ad stated that after a brief training session, the trainees would be supplied with an account to trade.

This group was invited to Chicago and trained for two weeks at the end of December, 1983. They began trading small accounts at the beginning of January. After they proved themselves, Dennis funded most of the trainees with $1 million in February.

"The students were called the 'Turtles.' (Mr. Dennis, who says he had just returned from Asia when he started the program, explains that he described it to someone by saying, 'We are going to grow traders just like they grow turtles in Singapore.')" - Stanley W. Angrist, Wall Street Journal 09/05/1989

The Turtles became the most famous experiment in trading history because over the next four years, they earned an aggregate sum of over $100 million dollars.

Richard Dennis proved that with a simple set of rules, he could take people with little or no trading experience and make them excellent traders.

==================================================================================

To download and read this book go here - Link

Kpls 20day swing is a variation of the Turtles base system. Worth a study.

Best.

11 comments:

Anonymous said...

Hi Lee,

If you haven't yet sold out your 2700 PUT "hedge", (mark my words) you will make a lot of money before the end of this week. The Feb futures you have shorted will be a gold mine in Feb 1st week. NIFTY is destined to kiss 2200 in Feb, at least to please you.

Thanks a lot for the "Turtles" download link you have given. It is "must read" inspiration for all traders rational or "irrational".

Saif said...

Thanks prashant and Lee for the replies to my previous qs..really helps a lot...one more basic question is one the concept of Deriv itself...
the trades happening in say futures RIL.Now RIl say has floated arnd 145 crore shares in market...n its market capitalisation is avg 35000 crores..Now when people trade in RIL futures,..is it that the quantity traded taken from those floated shares (and then who decides how much %tage of total shares shld be in Deriv segment).
also how do we know the total number of contracts issued for a series.Is it fixed.From the NSE website one gets the contracts traded on a daily basis(not the total number of contracts issued in first place).
Also is there any use of Derivatives apart from speculation.(bcz in investing atleast one gets returns from company performance).what purpose to Derivatives actually serve.
Sorry if the qs sound silly...but i do sometimes wonder abt these things..

Lee said...

@ Nifty Numerologist - Well I would be one happy trade if that happens..lets see :)

What is your basis for this statement? Numerology or something else?

And yeah I did close those PUTS since they were part of earlier trade...Right now short NF Feb series only.

Do I know you from somewhere like VFM? Cant recognize your handle from before.

@shaq - very tough question...I do not have a clear answer..If some other readers here know, I would appreciate a reply as well...Prashanth being a full time trader and broker might know...

Use of derivatives apart from speculation - Hedging/Risk management..There are many exotic strategies using options and futures.

Basic Stuff - http://www.investopedia.com/terms/d/derivative.asp

Best,
Lee

Anonymous said...

Hi Lee,

My statement is based on "dowsing", a skill used by the US soldiers to find "booby traps" in Vietnam war.

I made and lost a few million Rs. on the NIFTY in a matter of three months, before I learnt the hard way what "hedge" means.

Isn't it more economical and pragmatic to hedge your Feb NIFTY 1000 short, with a calender spread of March NIFTY 250 long, than by the Feb 1500 CE?

This way you pay much less upfront, and if you can time your exit correctly, I feel that you can gain more.

Looking at your name and photo, I feel that you are from Kerala. Am I right? You have the bricks and mortar to be a good fund manager. Your blog itself and your trading record should take you places.

Wishing you all the best
Prabhu

Saif said...

The option calc tool asks for volatility..
Now From the NSE page there is a Daily volatility link...But in that u have many like Underlying Daily Vola,Underlying Annualised vola so on...or shld we take VIX?
Which shld be taken for the calculations.
What abt the Interest rate and dividend in the calculator ..Is it 3% for Indian markets
After all this calc,the way we go abt hedging is it something like this.
If we want to be Delta Neutral say(=1)then we put in the approp strike price,spot price,volatility from the Nifty options available,and see if we get delta as 1 in the calc?
similarly does delta >1 indicate short term bullishness,and again we check for what combi we get the value??
Or can we take the delta as 1 and increase the option size itself so that effective delta becomes >1??
Could you please explain it with an Example.
Thanks

Lee said...

Hello Prabhu,
Thank you for your kind comments..Yes I am from Kerala :)

I am still exploring diff hedging strats...so urs is definitely interesting..I need to do more research.

Good Trading to You also!
Lee

Lee said...

Shaq, heres an example of the posn I took yesterday...

Option was 3000 call Feb.

Leave divident and rate as is.

Calc Date = 1/19 Exp Date = 2/26

Security price = 2833
Strike = 3000

Volatility=43.5(close to vix yest)
(I dont know if this is the correct way)

So I got price as 97 which is close to what I payed!..So I guess it is accurate.

And Delta = 0.38

So now my position delta = (1500/1000)*0.38= approx 0.6

So thats it..I think its correct...

So delta has to approach 1 to be delta neutral...But I did not want to load up on too many options...My main aim is capital protection.

Best.

Prashanth said...

Shaq,

If we want to be Delta Neutral say(=1)then we put in the approp strike price,spot price,volatility from the Nifty options available,and see if we get delta as 1 in the calc?
similarly does delta >1 indicate short term bullishness,and again we check for what combi we get the value??

First of all, Delta Neutral Trading means that you are Neutral in market. It does not matter if makret moves up or moves down, your total profit and loss is dictated only by Time decay and nothing else. Since time decay is small and also you have to constantly adjust for delta, its non viable for trading.

As regards to Delta > 1, well it means that your Hedge (if you have taken options as hedge) is not a hedge but the position itself. So, if you are Long Fut and have Puts for Delta of say 2, every point fall in Nifty will mean a gain of 1 point for you (Net) and every point rise in Nifty will mean a Loss of 1 point for you (Net).

Delta is something that you keep in mind to know as to how much hedge you have and how it will impact total position. Profits and losses should always arise from the main position and not from the hedge.

Saif said...

thx for the explanations Lee and prashanth...Delta Neutral is clear ....
and any Delta >1 (using puts/calls as hedge) u mean any hedge itself is the posn???is this bcz the size of hedge itself(or bcz delta itself from calculator itself is more) is now more than the opp trade..Going by Lee's formula :
Effective Delta = [put (hedge) / long fut]* delta from calculator..
For the Delta of 2 ...u said every fall in nifty there will be gain of 1 pt...this shld be bcz our profits r trimmed due to long future
but for every point rise in nifty why is it a loss of 1 pt...shld it not be nil ..as we do have puts to compensate..
shld the delta be checked everyday as volatility and the time for expiry keeps changing and adjust the trade accordingly with size..

Lee said...

Hi Shaq...Yes basically you are on the right path...Do some more r&d and things will make much more sense...

Delta well, you can check it daily...I guess volatility is also over important here...

Rajeev Guglani said...

Hi Lee,

Thanks for your advise to read Turtle trader. It really has given a new objective method to trade. But inspite of my efforts I have not been able to incorporate kpl swing formula in to metastock.

Can you explain the method to do so.

Thanks very much

Rajeev Guglani