Turtle Trading Indicators for Forex
Master the legendary Turtle Trading system with the essential indicators that turned novices into millionaire traders. Learn the complete technical setup used by Richard Dennis and William Eckhardt's famous trading experiment.
The Legendary Turtle Trading System
In 1983, commodity traders Richard Dennis and William Eckhardt conducted one of the most famous trading experiments in history. They recruited 23 novices, taught them a simple trend-following system, and turned them into the legendary "Turtle Traders" who generated over $175 million in profits.
The beauty of the Turtle system lies in its simplicity - it uses only four core indicators that can be easily applied to forex trading. Unlike complex systems with dozens of parameters, Turtle Trading focuses on capturing big trends with mechanical precision and strict risk management.
Turtle Philosophy:
"Give me a simple system that I can follow mechanically, and I'll make more money than someone trying to be clever with complex indicators."
The 4 Essential Turtle Trading Indicators
Donchian Channels
The Heart of Turtle Trading
- • 20-Day Channel: For breakout entries
- • 55-Day Channel: For major trend signals
- • 10-Day Channel: For stop loss exits
- • Upper band = Highest high of N periods
- • Lower band = Lowest low of N periods
Settings for Forex:
20-period (entry), 55-period (trend), 10-period (exit)
Average True Range (ATR)
Position Size Calculator
- • Period: 20 days (N-value)
- • Measures market volatility
- • Determines position size per trade
- • Risk = 1% of capital per N
- • Higher ATR = smaller position size
Turtle Formula:
Position Size = (Account × 1%) ÷ (N × Dollar per Point)
Simple Moving Average
Trend Filter & Direction
- • Period: 25 or 50 days
- • Confirms overall trend direction
- • Price above SMA = uptrend bias
- • Price below SMA = downtrend bias
- • Prevents counter-trend trades
Turtle Rule:
Only take long breakouts when price > 25 SMA
RSI (Optional Filter)
Momentum Confirmation
- • Period: 14 days
- • Confirms breakout strength
- • RSI > 50 for long entries
- • RSI < 50 for short entries
- • Filters false breakouts
Modern Addition:
Not in original system, but improves win rate
Complete Indicator Setup
Primary Indicators
- 📈 Donchian Channel (20, 55, 10)
- 📊 ATR (20) - Position sizing
- 📉 SMA (25) - Trend filter
- ⚡ RSI (14) - Optional momentum
Timeframes
- 🕐 Daily charts (primary)
- 🕑 4-hour charts (intraday)
- 🕒 Weekly charts (long-term)
- ⏰ H1 minimum for scalping
Complete Turtle Trading System for Forex
Entry Rules
System 1 (Faster Entry)
Enter long when price breaks above 20-day Donchian high
Enter short when price breaks below 20-day Donchian low
System 2 (Safer Entry)
Enter long when price breaks above 55-day Donchian high
Enter short when price breaks below 55-day Donchian low
Additional Filters
• Price must be above 25 SMA for long entries
• Price must be below 25 SMA for short entries
• RSI confirms momentum direction (optional)
Turtle Secret:
Skip System 1 entry if last System 1 signal was profitable. This prevents overtrading in choppy markets.
Exit Rules
Stop Loss Exit
Exit when price breaks 10-day Donchian Channel
This acts as a trailing stop loss mechanism
Whipsaw Protection
Alternative: 2N ATR stop loss from entry
Protects against volatile market conditions
Trend Reversal Exit
Exit longs when price breaks 20-day low
Exit shorts when price breaks 20-day high
Critical Rule:
Never risk more than 2% of capital on any single trade. Cut losses quickly and let profits run.
Turtle Position Sizing Formula
Step 1: Calculate N
N = 20-period ATR
ATR represents the average daily range of the currency pair over 20 periods
Step 2: Dollar Volatility
DV = N × $ per pip
Convert the ATR into dollar terms based on your account currency
Step 3: Position Size
Units = (1% × Account) ÷ DV
This ensures you risk exactly 1% of capital per N-value movement
Example Calculation (EUR/USD)
Account Size: $10,000
Risk per trade: 1% = $100
EUR/USD ATR(20): 0.0080 (80 pips)
Dollar per pip: $1 (mini lot)
Dollar Volatility: 80 × $1 = $80
Position Size: $100 ÷ $80 = 1.25 mini lots
Setting Up Indicators on Popular Platforms
📊 MetaTrader 4/5 Setup
Donchian Channels:
Insert → Indicators → Custom → Donchian Channel
Settings: Period 20, 55, 10 (separate indicators)
ATR:
Insert → Indicators → Oscillators → ATR
Period: 20
Moving Average:
Insert → Indicators → Trend → Moving Average
Period: 25, Method: Simple
📈 TradingView Setup
Donchian Channels:
Search "Donchian Channels" in indicators
Add three instances: 20, 55, 10 periods
ATR:
Search "Average True Range"
Length: 20
SMA & RSI:
SMA: Length 25
RSI: Length 14
🎯 Recommended Chart Template
Colors:
- • 20-Day Channel: Blue
- • 55-Day Channel: Red
- • 10-Day Channel: Orange
- • SMA: Green
Line Styles:
- • Entry channels: Solid lines
- • Exit channel: Dashed lines
- • SMA: Thick solid line
- • ATR: Histogram in separate panel
Best Practices:
- • Keep charts clean and simple
- • Use daily timeframe primarily
- • Save as template for consistency
- • Test on demo first