Q-1 Who follows Turtle Trading model?
As you would know 99 % of people lose money in Financial Markets, & only 1% make money. The ones who make money normally follow models which are based on VAR (Value at Risk). Normally such similar models are developed & followed by the following players:
- Large Hedge Funds
- Investment Banks
Corporates/Retail Players/HNIs/NRIs/Brokers/Sub Brokers segment of the market do not have access/time/expertise/experience in implementing such advanced models based on VAR (Value at Risk)
Q-2 What are the different kinds of Trading?
- Trend Trading
- Mean Reversion Trading (Range Trading)
Q-3 What is Trend Trading?
Trading in the Direction of Trend (Trend following is a form of reactive technical analysis)
Easy said than done
Issues in Trend Trading :
When to enter the trade? i.e. Timing of trade has to be identified
How much to trade? i.e. Quantity/Volume of trade has to be identified
What to trade? i.e. On which underlying the trade has to be entered has to be identified
Q-4 What is origin/genesis of Turtle Model?
Richard Dennis & Bill Eckhart were partners in a trading firm which was very successful.
Bill believed that Dennis had a special gift and Traders are born.
On the contrary, Dennis believed that Traders can be made.
To prove his point Dennis formed a group of people to teach his rules in 1983.
He called his students TURTLES after recalling turtle farms in Singapore.
Turtle traders were trained for 2 weeks. 80% of the time → spent on Risk Management&20% of the time → spent on Techniques to buy/sell
Turtles who followed discipline made significantly large returns and became one of the world’s most successful traders.
Experiment proved that:
Big money is not made when you buy low & sell high
Things that work best are RULES and not JUDGEMENT
Be consistent in techniques. Judge by process and not by the outcomes
Trend Traders don’t expect to be right every time. It’s not about frequencyof correctness but it’s about magnitude of correctness.
Q-5 How has MarketConnected Contributed/Innovated in the Original Turtle Model?
The original Turtle model was applied primarily in US markets on Commodities and Currencies in 1980’s. MarketConnected has modified the model for its application in India and has designed/innovated/back tested/implemented substantially advanced techniques to identify trends. We have named this model as “Trend Following Turtle” Model.
Q-6 What kind of Trend Following Turtle Models does MarketConnected has?
MC undertakes specific type of Technical Advisory services (training & handholding exercises) for participants
- Based on the type of underlyings
- Based on the amount of Capital.
There are 3 kinds of models based on underlying:
- Macro Model
- Forex Model
- Equity Model
| MACRO | FOREX | EQUITY |
|---|
FX
USDINR
USDJPY
EURUSD
GBPUSD
EURGBP | USDINR
USDJPY
EURUSD
GBPUSD | Sectorial Indices & Large Cap equities |
Commodity
Gold (Precious Metal)
Copper (Base Metal)
Crude (Oil (Energy) | | |
Index
Nifty
Bank Nifty | | |
| Interest Rate Futures | | |
Please note that the Target profits as mentioned in the below table are based on the returns which our existing participants have claimed to have generated on such models.
There are 2 kinds of models based on capital input:
- Rs 1 lakh to 5 lakh Capital.
- Above Rs 10 Lakh Capital.
| Initial Capital | 100,000 – 500,000 | > 10 Lakhs |
| Target Profit | 20% – 25% | 30% – 35% |
| Maximum Loss / Maximum Draw down | 30% | 30% |
| Overnight Value at risk i.e. One day adverse movement risk | 5% | 5% |
| Stresses Value at risk i.e. loss when extreme movement happens in all underlings in one day | 10% | 10% |
| Products | Options and Futures | Options and Futures |
| Underlying | USDINR, Nifty and Bank Nifty | - All Macro underlings OR
- FX underlying’s OR
- USDINR, Nifty and Bank Nifty
|
| Strategies | - Momentum Trading
- Option Strategies
| - Trend Following strategies
- Momentum trading
- Option strategies
|
| Capital Allocation/Diversification | Not more than 35% per underlying | Not more than 35-50% per asset class. |
Q-7 What are the Key Features of MarketConnected’s Trend Following Turtle Model?
The Key Features of Trend Following Turtle Style areDiversification – Trend Following Turtle Style has been inhibited with multiple underlings in which gives a perfect diversification in any mood of markets.
Pyramiding – Trend Following Turtle Style helps in accumulating at different levels (i.e. Averaging when price goes in direction of trend) by doing 4 hits in one underlying.
Maximum Drawdown risk – Trend Following Turtle Style has a very robust risk management system which defines the Value at Risk (VAR). VAR refers to a risk assessment measure that is used to establish the relationship between a possible declines in the market value of a portfolio over a specific period of time.
Q-8 What type of Risk Management is performed by MarketConnected’s Model?
Trend Following Turtle Style has a very robust risk management system which defines the Value at Risk (VAR). VAR refers to a risk assessment measure that is used to establish the relationship between a possible declines in the market value of a portfolio over a specific period of time.(a)Portfolio Level VAR
Max Draw Down Risk -> 30%
Normal VAR -> i.e. Overnight VAR i.e. one day VAR -> 5%(b)Individual underlying Level VAR
Based on the volatility prevailing of each underlying and the co-relation between each underlying the model determines individual underlying level VAR.
Q-9 What are the types of returns that our participants have generated on MarketConnected’s Model?
We have been providing extensive training and handholding (Through our Technical Analysis services) to our participants on the above models. The types of returns that our participants have been generating in Turtle Model have been as followsa) Macro Model :
- In Trending market: 30%-40% return of capital p.a.
- In Non-trending market: 20%-25% return of capital p.a.
b) Forex Model : 20%-25% return of capital p.a. as currencies are less volatile
Q-10 Does the model go LONG or SHORT?
The model can go long or short in line with trend.
Q-11 What is the Typical Average life of trade?
Average life of trade → 1 week
Range of life → 1 week → 1 month
Q-12 Is MarketConnected’s Model Manual/ Automated/ Algo based?
Q-13 Is MarketConnected’s Model a Rule based/Discretion based model?
Q-14 How many trades does MarketConnected’s model undertake in a year?
Normally 8-10 trades per year per underlying are generated.
Q-15 How many maximum trades does MarketConnected’s model undertake in a day?
1-2 new trades in a day
Stop loss for all outstanding trades & next triggers for pyramiding are kept in the morning itself
Q-16 What is the success rate on such trades?
Typical Success Rate on the Trades generated ranges between 60 – 70 %
Success rate is not the right word
Success rate doesn’t determine profitability of the model, rather the magnitude of profits in such successful trades counts
It’s not about frequency of correctness but about magnitude of correctness
Q-17 What is the time period over which one should assess the performance of such Model?
Q-18 Where does the model keep stop loss and take profit?
Model does not have target profit
So model does not exit the trade unless trend reverses
Trend following is a form of reactive technical analysis
Q-19 What techniques does MarketConnected’s model use?
Essentially techniques we follow are not complex.
We use simple technical analysis but yes it is a refined version of technical analysis
It is based on Trend, Momentum and Volatility.
Success in trading is not determined by what technique is followed
It is more about RISKMANAGEMENT
Things that work best are RULES and not JUDGEMENT
Be consistent in techniques.
Q-20 What did original turtles use at Techniques to buy and sell?
Buy: When market breaks 20 day High and square when market breaks 10 day low
Sell: When market breaks 20 day Low and square when market breaks 10 day highAlternate Technique:
Buy: When market breaks 40 day High and square when market breaks 20 day low
Sell: When market breaks 40 day Low and square when market breaks 20 day high
Q-21 Does model perform intermarket analysis to arrive at the trading/investing decisions?
Intermarket Analysis is performed to exit the position in the time of key event risk where the value at risk becomes high.
Q22 Is MarketConnected’s Model an arbitrage strategy?
No, it’s not an arbitrage strategy. It’s a directional strategy.
Q23 Does the model involve leverage?
Yes, the model currently applies on futures and has inherent levels of going levered up to 2x (2 times) typically.
Q24 Can the model be suitably modified to apply on non-leveraged portfolio / cash portfolio?
Yes, it can be applied to cash portfolio, but currently we do not have any such model up and running.
Q25 Does model utilize the funds at all times?
The Trend Following strategy utilizes the funds for not more than 35-40% of trading days. The idle money can be applied on Option strategies and momentum strategies to generate an incremental return.
Q26 What have been certain Illustrative big Trades since MarketConnected had designed this model?
Short EURUSD in 2015 (Feb-March) – Shorted @ 1.21 & booked profit @ 1.16
Short EURUSD in 2015 (Feb-March) – Shorted @ 1.11 & booked profit @ 1.05
Bought Bank Nifty in 2014 (Nov-Dec) – Bought @ 15000 & booked profit @ 19000
Bought USDJPY in 2014 (Oct) – Bought @ 110 & booked profit @ 118
Q27 Who have been Famous Trend Followers?
Jesse Livermore: (Great Bear of Wall Street) an American stock trader. He was famed for making and losing several multi-million dollar fortunes and short selling during the stock market crashes of in 1907 & 1929George Soros: Popularly known as “The Man broke the Bank of England”. He brought Bank of England to its knees when he demolished the monetary system of Great Britainwith an elegantly constructed bet against its currency
Richard Donchian: Creator of the managed futures industry
