A Bare-Bones Turtle Algorithm for Gauging Trend-Following Conditions

The core Turtle rules were fully mechanical, but several operational choices, such as position sizing nuances, market selection, roll/contract handling, and execution practices were left to judgment or circumstance. Many would argue the philosophy behind the Turtles mattered as much as the rules themselves, and differing interpretations of that philosophy go a long way toward explaining why their results diverged so widely. The mechanics, however, are straightforward: you can distill them from the published books and courses, strip them down even further, and apply the resulting rule set across a broad portfolio to take the pulse of trend-following today.

I’ve worked with the Turtle framework for many years, coded numerous variants, and even compared notes with a handful of original Turtles. If any method can “take the temperature” of market trendiness, this one can. This system synthesizes a shorter-term trend mechanism (that limits execution based on the prior outcome) with a true longer term trend following entry and exit method (two months of data are used to determine entry).   Short-term trading is difficult and often falls victim to over trading.  The shorter-term entry is used to try and capitalize on the genesis of a big trend.  Preventing another trade after a winner is one method of reducing trading and chop.  If the short-term break out turns into a trend and entry is prevented, then the 55-day break out is there to capture it.  Below are the rules I extracted to build a fully mechanical, bare-bones algorithm for that purpose.

Rules Used in This Analysis

Conventions & Definitions

• Breakout (stop basis): Enter on a stop when price exceeds the specified lookback extreme by 1 tick (or exactly at the extreme if your platform supports that).
• N: 20-day weighted Average True Range (WATR) used for both systems.
• Risk stop (volatility stop): A stop placed 2×N from the entry price.
• Swing stop: For System #1, use the 10-day highest high/lowest low; for System #2, use the 20-day highest high/lowest low.
• Closest stop wins: The active protective stop at any time is the tighter of the risk stop and the swing stop.
• Loser vs. non-loser (for System #1’s gating rule):
  • A trade that is stopped out by 2×N is a loser.
  • A trade that exits via the 10-day swing stop (even if it’s a loss) is not counted as a loser for gating.
  • Profitable exits via the 10-day swing stop are obviously not losers.

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System #1 — 20-Day Breakout (Conditional)

Purpose: Only take the next 20-day breakout if the most recent 20-day breakout resulted in a 2×N loss.

• Entry condition (gated):
  • Compute the 20-day Donchian channel.
  • You may only take a long (new 20-day high) or short (new 20-day low) breakout if the last System #1 trade ended with a 2×N risk stop.
  • If the last System #1 trade exited via the 10-day swing stop, it does not unlock the gate.
• Initial protective stops (at entry):
  • Risk stop: 2×N from entry.
  • Swing stop: Opposite extreme of the past 10 days (lowest low for longs, highest high for shorts).
  • Use the tighter of the two stops at all times (“closest stop wins”).
• Exit rules:
  • Exit if price hits the active stop (risk or swing).
• Bookkeeping for gating:
  • If exit was the 2×N risk stop, mark the trade as a loser (this unlocks the gate for the next entry).
  • If exit was the 10-day swing stop, do not mark as a loser (gate remains locked).

• Always evaluating: System #1’s breakout logic runs continuously, but entries are allowed only when the gate is unlocked by a prior 2×N loss.

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System #2 — 55-Day Breakout (Always On)

Purpose: Classic trend capture that runs regardless of System #1’s state; does not affect System #1’s gating.

• Entry condition (ungated):
  • Enter long on a 55-day high breakout; enter short on a 55-day low breakout.
• Initial protective stops (at entry):
  • Risk stop: 2×N from entry.
  • Swing stop: Opposite extreme of the past 20 days (lowest low for longs, highest high for shorts).
  • Use the tighter of the two stops at all times.
• Exit rules:
  • Exit if price hits the active stop (risk or swing).
• Isolation from System #1:
  • System #2 trades and outcomes do not influence System #1’s “last-trade-was-a-loser” gate (also known as a filter).

The Portfolio

Currencies (CME FX)

Rates (CBOT)

Equity/Index

Metals (COMEX/NYMEX)

Energies (NYMEX)

Grains/Oilseeds (CBOT)

Livestock (CME)

Softs (ICE)