There are many professional traders that can teach us some important lessons. Do you know Richard Dennis? He is one of such. He became very popular when he turned a $400 initial trading account into $200 million. He is also known thanks to the Turtle Trading group. What are the Turtles Traders? What can you learn from Richard Dennis? Let me tell you all about it.
Richard Dennis and the Turtles
Richard Dennis, a commodities speculator, has immensely profited in the markets. Moreover, he was convinced that everybody can be as successful as he was. His fellow trader, and a friend, William Eckhardt, was of a different opinion. So Dennis created a group of traders that he was training for a quite short period of time. He called them the Turtles as he thought in the category of growing a trader the way the turtles were grown on the farms in Singapore. Are you curious how this ended? Well, his experiment was a success. Nevertheless, Dennis’s future trading fund incurred some huge losses during the market crash and he retired from trading afterwards.
Regardless of the ending of the story, Richard Dennis has helped many people to become better traders and you can also learn from him. So let’s see what this man can teach you.
Lessons from Richard Dennis the Market Wizard
Richard Dennis was a Systematic Trend Follower. I will present 10 trading tips that come from his method.
Do not miss the trend out
You want to trade when the market is trending. To ensure you will catch every opportunity, trade breakouts. While pullbacks may seem more appealing, they do not happen all the time. So trade the breakouts if you do not want to miss the trend out.
Set a trailing stop loss
You follow the trend. But it is nearly impossible to anticipate how high or how low the market will move. The tip from Dennis is to trail the stop loss. This way you will secure your position each time at a more beneficial level. Just do not set the stop loss too tight as this may result in closing the position on the retracement.
Do not close out of fear
It is natural traders want profits. High profits. And they open a position and see how it goes in the desired direction and at some point, they begin to fear losing what they gain. So they get out before receiving a signal it is time to close the position. Do not do it. Keep the transaction open until the situation in the market starts to turn against you.
Expect the unexpected
Markets are unpredictable. There are ways to forecast with some probability what will happen next, though, you can never be 100% sure. That is why you should expect the unexpected. Even if you think the market is so high (or so low) the only option is to reverse, you should still expect the unexpected. The market can go beyond the extreme and you can easily find proof in the historical data.
Keep your emotions in check
I am sure you have heard it hundreds of times and there is a reason for that. Emotional trading leads to bad decisions. You can be so nervous and afraid of losing, that you will exit way too early. You may be so greedy, that you will hold the position for too long. You may be frustrated and jump into the market just to rebound from the losses. All these are not helping you to become a better (which also means more successful) trader. You should keep your emotions in check and make trading decisions based on a deep analysis of the market.
I know it is not always that easy to stay calm while the situation in the market changes rapidly. You have to try, though. Prepare a clear trading plan that you will solemnly follow. There should be stated how much you can risk on a single trade (should not be more than 1% of your overall capital), how many trades you plan to perform during a day or what is your long-term goal. Having a trading plan on hand should help you to stay on the path of tranquillity.
Many traders will fail even when they have access to a profitable strategy. This is because they are not consistent in using it. After the first drawdown, they will just quit and search for another technique. You should not do this. Be consistent, analyse the situation that happened and the circumstances, maybe it is necessary to introduce some changes. Just do not give up at the first stumble.
Of course, the strategy should prove its viability. You can, for instance, backtest the strategy. When it brought profits in the past, it may do the same in the future (there is never a guarantee, though).
Although many want fast and big results, trading is a process that should be taken step by step. You have many things to learn and you will make mistakes. They are an inseparable part of trading. So it makes more sense to start small, begin with small trades and grow with time. Think about it as the surgery. A surgeon has to go a long way till he will be able to operate alone. And more importantly, each small step matters.
Would you be surprised if I was to tell you I could trade even not knowing what market am I on? Well, I could. Why? Because it is the price that counts. No matter the name of the asset, the positions are entered and exited according to the current price. The price is driven by the emotions of buyers and sellers and in a long term, a trend is formed. You follow the trend so buy when the price goes up and sell when it goes down. That is all. The price is everything.
Be ready for loses
Loses will occur, you should be ready for them. False breakouts are likely to happen. And it does not mean the strategy of trading breakouts is all wrong. Because what matters is not how often you win and how often you lose. But it is the question of how much you win and how much you lose. Your wins should be able to offset your losses. And then you have great chances to boost wealth.
Focus on the long term growth
You should define your goals. Short and long term. But do not pay too much attention to the short term results. Loses will occur, and the systems will fail, but in the long term it may turn out that the result is quite satisfactory. So keep your focus on the long term growth rather.
Pros and Cons of Richard Dennis’s Trading Strategies 👍👎
- Focuses on price-driven trends, enabling traders to capitalize on market movements
- Emphasizes the importance of emotional control in trading
- Advocates for consistent application of a profitable strategy
- Requires discipline and patience, as not all trades will be profitable
- Demanding for beginners due to the necessity of understanding complex market dynamics
- Requires acceptance of potential losses as part of the trading process
|Richard Dennis’s Key Trading Principle
|Do Not Miss the Trend
|Trade when the market is trending and capitalize on breakouts.
|Set a Trailing Stop Loss
|Secure your position at a beneficial level without predicting market extremes.
|Do Not Close Out of Fear
|Keep transactions open until the market situation starts to turn against you.
|Expect the Unexpected
|Be ready for unpredictable market movements and extreme trends.
|Stick to a proven strategy, even when facing initial losses.
Richard Dennis has a lot to teach you. Although some argue that his method is not applicable anymore, the principles of his strategy are still in use. And every trader can learn a lesson.
Look at the bigger picture and try to understand the general notion. Identify the trend and stay faithful to your strategy. Apply proper risk management. Always think about preserving your capital. Do not let emotions take control and follow your system. The system is less difficult to formulate than to execute. You must demonstrate discipline.
Finally, I would like to remind you, that Olymp Trade offers a free demo account. If you have ever any doubts, want to test a strategy, check a new indicator or just get more confidence, do not hesitate to use it.
Wish you a great trading performance!
Q&A on Richard Dennis and His Trading Strategies 🎯
- Q: How did Richard Dennis start his trading career?
- A: He began his trading career with a modest initial investment of $400, which he successfully grew into $200 million.
- Q: What is the significance of the Turtle Traders?
- A: The Turtle Traders were a group of individuals trained by Richard Dennis to prove that successful trading could be taught.
- Q: How important is emotional control in Richard Dennis’s trading strategy?
- A: Dennis placed a significant emphasis on emotional control in trading, warning against decisions driven by fear or greed.
- Q: Why does Dennis advocate for a trailing stop loss?
- A: Trailing stop losses allow traders to secure their positions at a more beneficial level without needing to predict market extremes.
- Q: How can a trader prepare for unexpected market movements?
- A: By expecting the unexpected, traders can better cope with the inherent unpredictability of the markets.
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