Are great traders born or made? This question has been a long time discussion amongst traders and in 1983 two legendary commodities traders, Richard Dennis and Bill Eckhardt, close friends who often debated the subject, embarked on an experiment to find the answer.
Richard believed that he could teach people to become successful traders and Bill felt that they were born out of genetics and aptitude. In order to settle this debate Richard suggested that the two recruit and train a group of traders; once trained, these apprentices would be given actual accounts to trade. They proceeded to place ads in the large financial publications which stated that after a brief training period the trainees would be given accounts to trade. Richard was arguably the most famous trader of the time and over 1000 applicants sent in submissions in hopes of being taught. Eighty of the applicants were interviewed and the final original group was trimmed down to consist of thirteen individuals.
The individuals were invited to Chicago in December of 1983 where they then received two weeks of training and began trading small accounts in January of 1984. Once they had proven themselves for a short time, Richard, using his own capital funded most of the group with accounts ranging in size from 500k – 2mm at the beginning of February. He had just returned from Asia, where he had visited turtle farms when this experiment began and decided to call the group “Turtles”, explaining that “We are going to grow traders just like they grow turtles in Singapore”.
The system they were taught to trade was a trend following system based on breakouts to new highs/lows, they could use a 20-day breakout or a 55-day breakout and were given full discretion to allocate as much of their equity as they desired to either system or any combination thereof. While this may sound risky, the Turtles had specific rules to follow regarding which markets could be traded, position sizing, pyramiding, entries, exits, stops, adjustments when losing, being consistent, etc. Richard felt he had set them up to be successful by giving them a mechanical system which left little to discretion, they merely had to be disciplined enough to follow the rules.
So did it work? First let us look at what Richard Dennis often said-
“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a set of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad” – From Market Wizards, by Jack Schwager.
As for the Turtles, some of them did not make money, for the reason Richard stated above, they simply could not follow the rules. However, the experiment itself proved to be a legendary success and has become the most famous market experiment of all time. The experiment was replicated in December of 1984 and according to former Turtle, Russell Sands, the two groups collectively earned more than 175 million dollars over the following five years.