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Richard Dennis Trading Style
Learn the strategies and methods of the legendary Turtle Trading creator
Trend Follower
Pioneered systematic trend following strategies that focused on capturing major market moves
Risk Pioneer
Developed position sizing rules based on volatility that revolutionized trading risk management
Teacher/Mentor
Creator of the famous Turtle Trading experiment, proving that trading success could be taught
Who is Richard Dennis?
Richard Dennis is a legendary commodity trader who rose to fame in the 1970s and 1980s. Born in Chicago in 1949, Dennis started trading with a borrowed $1,600 and reportedly turned it into over $200 million in about a decade, earning him the nickname "Prince of the Pit."
Dennis is most famous for the "Turtle Trading Experiment," where he and his partner William Eckhardt settled a debate about whether successful trading could be taught. They recruited and trained a group of people (the "Turtles") with a specific trading system, which proved highly successful and has influenced countless traders since.
Beyond his trading success, Dennis has been an advocate for systematic trading approaches that remove emotion from decision-making. His methodologies focused on trend following, risk management, and clear entry/exit rules that could be consistently applied across markets.
"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."
- Richard Dennis
Trend Following
Systematic Trading
Commodities
Turtle Trading
Position Sizing
Richard Dennis' Trading Principles
Core philosophies that defined the Turtle Trading system
Trend Following
Dennis believed that markets trend, and capturing significant portions of these trends was the key to profitable trading. His systems were designed to identify and ride major market movements.
"The trend is your friend" was more than a slogan for Dennis—it was the foundation of his entire approach to markets.
System-Based Trading
Dennis pioneered systematic approach to trading, with clear rules for entries, exits, and position sizing that removed emotional decision-making from the process.
"Trading decisions should be made as objectively as possible with predefined risk parameters and rules."
Expectancy Mindset
Dennis understood that trading success came from the mathematics of positive expectancy—not from being right on every trade, but from having winning trades that far outweighed losing ones.
"You need to focus on your winning percentage times your average winner divided by your losing percentage times your average loser."
Diversification
Dennis traded across multiple markets and uncorrelated instruments, understanding that diversification was essential for consistent returns and managing drawdowns.
"Trading a diversity of markets with a proven system gives you the highest probability of capturing significant trends when they occur."
Risk Management: The Dennis Approach
Revolutionary risk management principles that were decades ahead of their time
1
The 2% Rule
Dennis pioneered what is now known as the 2% rule—never risking more than 2% of account equity on any single trade, ensuring no single loss could significantly damage the portfolio.
2
Volatility-Based Position Sizing
His revolutionary approach sized positions based on market volatility, using ATR (Average True Range) to adjust position sizes, ensuring consistent risk across different markets.
3
Mechanical Stop Losses
Dennis incorporated non-negotiable stop losses into his trading systems, typically placed at a specific volatility measurement away from entry, protecting capital from significant drawdowns.
4
Correlation Management
He carefully managed the correlation between positions, understanding that multiple highly correlated trades effectively constituted a single larger position from a risk perspective.
5
Pyramiding
Dennis utilized pyramiding—adding to winning positions as they moved in favor, but with progressively smaller position sizes to manage overall risk exposure.
6
Maximum System Heat
He developed the concept of "system heat" to limit the total risk across all positions, ensuring that multiple simultaneous losses wouldn't devastate the account.
Trading Techniques
Specific methods used in the Turtle Trading system
Breakout Entries
The Turtle system primarily used breakouts from price channels to enter trades, specifically the 20-day high/low breakout (System 1) and 55-day high/low breakout (System 2).
This approach identified markets that were potentially starting major trend moves, allowing traders to position themselves early in significant market trends.
Trailing Stops
Dennis used volatility-based trailing stops, typically set at 2 ATR (Average True Range) from the most favorable price since entry, allowing profits to run while protecting gains.
This technique ensured that winning trades weren't closed prematurely, maximizing the capture of major market trends.
Position Sizing Formula
The Turtles used a specific formula to determine position sizes: Units = 1% of Account / (Market Volatility × Dollar Value of a Point)
This approach standardized risk across different markets and account sizes, creating a truly scalable trading methodology.
Adding to Winners
Dennis taught the Turtles to add to winning positions with up to four additional "units" as the trend developed, each entry at 1/2 N (a volatility measurement) beyond the previous entry.
This pyramiding technique increased exposure to successful trends while maintaining strict risk parameters.
Richard Dennis' Most Famous Trades
Soybean Oil (1970s)
Early in his career, Dennis made one of his first significant profits trading soybean oil futures, reportedly turning $400 into $40,000 in just a few months.
This trade helped establish his reputation in the Chicago trading pits and provided capital for his future trading ventures.
Sugar Bull Market (1974)
Dennis captured a significant portion of the massive sugar bull market, which saw prices increase by over 1,400% in less than two years.
His trend-following approach allowed him to ride this extraordinary move, which was one of the trades that helped him make his first million dollars.
Treasury Bond Trend (1980s)
During the early 1980s, Dennis capitalized on the significant trends in U.S. Treasury bonds as interest rates shifted dramatically under Federal Reserve Chairman Paul Volcker.
These trades were particularly notable as they demonstrated the effectiveness of the Turtle Trading system across different market types, not just commodities.
Silver Market Crash (1980)
When the Hunt brothers' attempt to corner the silver market collapsed in 1980, Dennis reportedly profited significantly from the ensuing crash by taking short positions.
This trade showcased his ability to capitalize on major market dislocations and his willingness to trade both the long and short sides of markets.
Lessons From Richard Dennis For Your Trading
Actionable insights you can apply to your own trading strategy
Define Your System
Create clear, objective rules for entries, exits, position sizing, and risk management. Remove ambiguity and emotion from your trading decisions.
Size Positions by Volatility
Adjust your position sizes based on current market volatility to maintain consistent risk exposure across different markets and conditions.
Let Winners Run
Use trailing stops rather than profit targets to allow winning trades to capture the full extent of market trends, potentially turning good trades into great ones.
Think in Probabilities
Understand that individual trades don't matter—it's the long-term expectancy of your system that determines success. Accept losses as a normal part of trading.
Trade Multiple Markets
Diversify across uncorrelated markets to increase your chances of catching significant trends while reducing overall portfolio volatility.
Follow Your Rules
The most brilliant trading system is worthless without disciplined execution. Commit to following your system’s rules consistently, even during losing streaks.
The Turtle Trading System in Action
How Richard Dennis' strategies were applied by the Turtles
Coffee Futures (1980s)
The Turtles applied Dennis' breakout strategy to coffee futures, entering long positions on 20-day highs. They used volatility-based stops and added to positions as the trend developed.
This trade captured a significant uptrend, demonstrating the power of trend following and disciplined position sizing in volatile commodity markets.
Japanese Yen (1980s)
Using the 55-day breakout system, the Turtles entered short positions in the Japanese yen as it broke below key support levels, riding a prolonged downtrend.
The trade showcased the system's ability to profit from both bullish and bearish markets, with strict risk management ensuring limited losses.
Common Mistakes When Applying Dennis' Strategies
Pitfalls to watch out for when adopting Turtle Trading principles
Overtrading
Traders often take too many positions or trade too frequently, ignoring Dennis' emphasis on waiting for high-probability setups.
Ignoring Volatility
Failing to adjust position sizes based on market volatility can lead to oversized risks, undermining the system's risk management foundation.
Lack of Discipline
Deviating from the system's rules during drawdowns or emotional moments can destroy the edge provided by Dennis' systematic approach.