The legendary Turtle Trading system - rule-based breakout entries with mechanical risk management
Richard Dennis was a legendary commodities trader who proved that trading could be taught through mechanical rules rather than intuition. In the 1980s, he famously recruited a group of students (called "Turtles") and taught them his trading system. The Turtles went on to generate over $100 million in profits for Dennis, validating his belief that consistent, rule-based trading outperforms discretionary approaches.
The Dennis Mechanical Trading System is based on breakout entries—buying when price breaks above recent highs—combined with strict risk management using Average True Range (ATR) for position sizing and stop loss placement.
Signal: Price breaks above the highest high of the prior 20 trading days
Logic: A 20-day breakout signals a short-term trend change. When today's high exceeds the highest high of the previous 20 days, it indicates strong momentum breaking out of a consolidation range.
This is the faster, more frequent system that generates more trading signals.
Signal: Price breaks above the highest high of the prior 55 trading days
Logic: A 55-day breakout signals an intermediate-term trend change. This longer timeframe filters out noise and captures more significant breakouts with higher probability of success.
This is the slower, more selective system that generates fewer but higher-quality signals.
Calculation: N = 20-day Average True Range (ATR)
Logic: ATR measures volatility. Higher volatility stocks get smaller positions, lower volatility stocks get larger positions. This ensures consistent risk across all trades regardless of stock price or volatility.
Target: Risk 1% of account per trade
Placement: Entry Price - (2 × N)
Logic: Place stop loss 2 ATR units below entry. This gives the trade room to breathe while protecting against major reversals. The mechanical placement removes emotion from exit decisions.
If price hits this level, exit immediately. No exceptions.
System 1 Exit: When price falls below the lowest low of the prior 10 days
System 2 Exit: When price falls below the lowest low of the prior 20 days
These mechanical exits capture trends while protecting profits. The longer exit channel for System 2 allows bigger trends to develop.
Every decision is predetermined. No guessing, no emotions, no second-guessing.
Buy breakouts (momentum), not dips. The system captures trends, not reversals.
Position size adjusts based on ATR. Volatile stocks get smaller positions, stable stocks get larger positions.
Every trade risks the same percentage of account. This allows for consistent position sizing across all trades.
When both systems generate signals, prioritize System 2 (55-day breakouts) as they have higher probability of success.
Enter any stock symbol to check if it's currently at a breakout level. The scanner will tell you:
Click "View Top 30 Breakout Signals" to see the best current opportunities ranked by breakout strength. This shows:
If a stock shows "No Breakout Signal", it means the price is not currently at a 20-day or 55-day high. This is normal - most stocks won't be at breakout levels at any given time. Check back later or try another stock.
The original Turtles who learned this system generated exceptional returns:
Note: Past performance does not guarantee future results. The system works best in trending markets and can struggle in range-bound markets. Always use proper risk management and position sizing.