Richard Dennis's Trend Following Rules for Modern Markets

Core Turtle Rules

The original Turtle system had two primary entry signals: a 20-day breakout (System 1) and a 55-day breakout (System 2). The exit for System 1 was a 10-day low, and for System 2, a 20-day low. This dual-system approach allowed for both shorter-term and longer-term trend capturing.

Adapting for Today's Markets

In today's markets, these parameters may need adjustment. For a volatile stock like AAPL, a 20-day breakout might still be effective, but for a broad market index like SPY, a longer-term breakout, perhaps 100 or 200 days, might be more appropriate to filter out noise. Backtesting is essential to determine the optimal parameters for a given instrument.

Example with AAPL

Let's consider an example with AAPL. A trader might use a 50-day breakout for entry and a 20-day low for exit. If AAPL closes above its 50-day high, the trader would initiate a long position. The initial stop-loss would be placed at the 20-day low. As the trend progresses, the stop-loss would be trailed upwards, locking in profits.