Revisiting the Turtle Trading System - A Portfolio Performance Analysis

If you have been following my blog for a while then you may be aware of the fact that I have been interested in the development and trading of the Turtle trading system - developed by Richard Denis in the eighties - using automated trading systems. Through the past few years I have made several important developments which began with the simple implementation of systems No.1 and No.2 and the final implementation of the Ayotl trading system which is my fully automated - portfolio enabled - version of the turtle trading system which includes all correlation and trade limiation rules used by the original turtles. Within this post I want to talk to you about my latest analysis of the turtle trading strategy which includes a 10 year performance review of a combined portfolio trading several instruments.

When you analyze the performance of the turtle trading system for the past 10 years (jan 2000 to Jan 2010) on separate instruments things do not appear to look that good for most pairs. The EUR/USD is the only one that gives outstanding results while other pairs seem to struggle to make any profit or even to break even. However I have always been interested in the portfolio character of the turtle trading strategy and analyzing mixed performance along a basket of instruments becomes important to truly know how well positions taken on different pairs at different times affect the depth and extent of draw down cycles.

In what has appeared to be a portfolio centered week (certainly reading the past few posts you will know what I mean !) I decided that it would be great to show you some of the performance characteristics of a combined simulation of the turtle trading system No.2 on the EUR/USD, USD/CHF, GBP/USD, AUD/USD, NZD/USD and USD/JPY. I did not include any correlation or trade limiting rules and all instruments were traded with separate balances with each loss or profit made by an instance affecting exclusively its own position sizing. Using some scripts provided by Asirikuy members (thanks again for all your contributions by the way !) I was able to combine, reorganize and analyze all the backtests as if they were a single trading system. The results, which show us the potential of the Turtle Trading system, are shown below (small table shows largest draw down periods).
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The combination of all these different currency pairs generates a portfolio which was able to achieve in simulations an average 21% compounded average yearly profit with a maximum draw down level of 29%. As it is expected, draw down period lengths for this system are large with the biggest draw down period lasting about 4 years from2004 to 2008. However, the inclusion of different currency pairs meant that the trading system was able to preserve equity and avoid further dips under unfavorable market conditions characterized by a lack of well defined rapidly developing trends.

In the end I have to say that these results are encouraging and they point out that the inclusion of the additional portfolio rules may be able to improve profitability even further. Overall the turtle trading system seems to continue to be a reliable and robust trading system which - despite pronounced draw down periods - always seems to be able to come through to the other side regardless of ever-changing market conditions. The fact that trends always eventually develop - as a consequence of crowd behavior - seems to mark the long term success of this trading strategy.

If you would like to learn more about the turtle trading system and how you too can trade Ayotl or learn how to code your own long term profitable systems based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Ayotl... Almost Ready for Action ! :o)

As you may know, for the past year or so I have been developing my own personal implementations of the Turtle Trading System developed by Richard Denis in the 1980s. I first developed System No.2, then System No.1 and then I published an article on the December 2009 issue of currency trader magazine. The article featured 10 year simulation results of System No.2's performance over a curency basket of more than 5 trading forex instruments along with some modifications of the entry criteria which boost the systems overall profitability and reduce its draw down.

For those of you who don't know - or missed my last post on the turtle trading system - I have been working on a fully automated implementation of the whole turtle trading system for the metatrader 4 platform which will apply all the rules as they were traded by the original turtles. The new implementation is able to handle a full turtle trading portfolio with any combination of System No.1 and System No.2 instances applying all the correlation and total trade limit rules enforced by the original turtle trading system.

After more than two months of demo testing and development, today I can say that the Ayotl system is ready to be released, in fact, the system will be released this Sunday to all Asirikuy members. The system is far more complex than any other EA I have programmed since it features 3 different expert advisors each one with a very distinct job within the trading system.

The first two expert advisors represent systems No.1 and No.2. These experts are loaded on each one of the different currency pairs the trader wishes to use and they handle the particular trades of each one of the different instruments according to the system's rules. The third EA, which is the most important part of the system is the Ayotl controller which gives or denies trade permissions to the first two experts. The Ayotl controller calculates correlation between currency pairs, checks the total number of trades, the trades per currency and the trades per instance and then issues permissions according to the allowed trades taking into account all the turtle portfolio management rules. Below you can see a picture of the controller in action. As you see the controller displays a large amount of information which is very useful for the turtle trader.
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As I said on the previous Ayotl post, this is, to the best of my knowledge, the ONLY FULL implementation of the turtle trading system. Without a doubt we will start testing the system on Asirikuy on a basket of 3-6 different currency pairs on live trading and we'll see if in fact the portfolio management rules do decrease risk and increase profitability when compared with simply trading independent instances of the trading system. I think that in the long run the Ayotl trading system will become a vital part of Asirikuy as one of our main tools to reach long term profitability.

If you would like to learn more about what I have learned in automated trading and how you too can become long term profitable in the forex market using this approach please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Trading the Full Turtle System... The Ayotl Trading System

For the past year I have been very interested in the development of a trading system that matches all the exact specification of the original turtle trading system developed by Richard Denis in the 80s. I have separately programmed and evaluated both turtle trading systems (no.1 and no.2) in a reliable fashion leading to a publication on the 2010 January issue of currency trader magazine of my research done on the Turtle trading system No.2 and its performance on 7 different currency pairs during the past 10 years of trading. Near last year's end I published a post which stated that I was working on an implementation of the turtle trading system that would allow completely automated trading of both strategies including all correlation and portfolio management rules which formed part of the original turtle system.

As far as I know, there is no precise implementation of the separate trading systems available for mt4 besides my own and there is currently no implementatin of all the portfolio managment and correlation strategies which are supposed to further enhance the profitability of this trading system. Today's post aims to show you what I have been up to for the past few weeks regarding this trading system and what I have achieved... The Ayotl trading system.

As always, there is an etimological reason for the name. Since I want my developments to be able to be distinguished from other people's attempts to develop a turtle trading system expert advisor I decided to give mine the name Ayotl, which simply means turtle shell in Nahuatl, the original language used by the Aztecs in Mexico. A common word which also has its roots in Nahuatl is tomato, which comes from the word tomatl from the same language.

What is the Ayotl trading system exaclty ? It is not only a single expert advisor but a conjunction of three different expert advisors which are used together in order to trade the turtle trading system in a portfolio environment. There is an EA that trades system no.1, another EA that trades system no.2 and another EA which is called the "turtle controller" which simply controls what the other experts are doing and authorizes or denies permission to open new trades. The controller EA takes into account the number of total open trades per currency, total long open trades, total short open trades, total trades opened on heavily correlated instruments, total number of trades opened on uncorrelated instruments, etc. The controller has a myriad of functions and manages all the experts so that they work in unisone, just like an original turtle trader would have done.

Ayotl is the first true automated representation of the whole turtle trading system. The person who wants to use it picks up the instruments and simply decides whether to use system No.1 or No.2 on each one, loads the experts on each different chart, loads the controller on a separate chart (instrument does not matter) and defines the magic numbers used for each one of the separate instances. Then the system is initialized and the controller starts to handle requests and answers to each one of the interfaces. While it does that the EA checks if each request fulfills the necessary criteria to allow for the opening of new trades. The only shortcoming of this approach is that the Ayotl system cannot be backtested due to the fact that it uses several different currency pairs and the interactions between trades taken on different pairs but the separate systems can be tested individually on backtesting achieving the results shown on the Currency Trader Magazine article I mentioned at the beginning.

Without a doubt trading either system no.1 or no.2 yields profitable results in the long term . Manually looking at the probable modifications caused by the portfolio strategy only points out to a diminishment in risk because of the diversification and restrictions caused by correlations, total number of trades, etc. For the past two weeks I have tested the strategy on the 5 minute time frame (only to have fast breakouts and exits to test the programming, clearly the final system will be traded ONLY on daily charts like the original turtle trading system) and have found it to behave just exactly as it is supposed to. After a little bit more testing and the writing of a manual for the system it will be released for use to both ebook customers and newsletter subscribers. Watch my twiter feed on the bottom of the left handed sidebar (or subscribe to the feed) to get the news when the release is coming out.

If you would like to learn more about long term profitable trading systems and how you too can program design and use your own trading systems to achieve reliable profits in the forex market please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !