How the Turtles would Trade Today | with Richard Dennis, Jerry Parker, and Brian Proctor

Episode Overview

• Legendary trader Richard Dennis and two original "Turtles," Jerry Parker and Brian Proctor, discuss the evolution of trend-following from the original Turtle experiment to the modern era.
• The conversation centers on a major debate around volatility targeting, with the guests offering differing perspectives on whether it's a necessary business adaptation or a corruption of core trend-following principles.
• The group reflects on the timeless lessons of the Turtle program, including the supreme importance of risk management, disciplined rule-following, and the psychology of letting winners run.
• The discussion explores the challenges facing trend followers today, such as the concentration of capital in a few large firms and market interventions by central banks that can truncate trends.

Key Concepts

• Evolution of Investor Focus: Investor due diligence has shifted from pure performance to institutional comfort factors like a firm's size and number of PhDs, leading to a heavy concentration of assets in a few large CTA firms.
• The Volatility Targeting Debate: A central theme where Richard Dennis questions its necessity (investors can adjust their own allocation), Jerry Parker sees it as a client-driven compromise that encourages premature profit-taking, and Brian Proctor explains it as a business necessity in a low-interest-rate environment.
• Timeless Trend-Following Principles: The core tenets of the Turtle program remain crucial: cut losses small, let winning trades run until the trend is confirmed to be over, adhere to strict risk management, and avoid over-trading.
• The Primacy of Rules: The idea that while "the trend is your friend," it is the strict, disciplined adherence to a trading system's rules that acts as a "guardian angel," protecting a trader from emotional decisions and ruin.
• Challenges to Modern Trend-Following: Richard Dennis expressed doubt that the original Turtle program would work today due to "exogenous variables," specifically central bank interventions that tend to shorten or "truncate" market trends.
• Continuous System Development: A key lesson from the Turtle program is the need to constantly research and evolve trading systems, blending different timeframes and ideas to maintain an edge in changing markets.

Quotes

• At 0:03 - "You probably still believe that the trend is your friend when really the rules are your guardian angel. I’m not sure which one I would rank as the first, most important principle. I think it’s pretty much a dead heat." - An opening quote from Richard Dennis highlighting the equal importance of following trends and adhering to strict rules.
• At 2:00 - "How large is your firm? Does your firm make me comfortable? How many PhDs do you have? It’s less about the markets and performance, it’s more about... there are lots of assets coming into CTAs, but only four or five." - Jerry Parker describes how investor due diligence has shifted toward institutional comfort factors rather than just performance.
• At 4:34 - "I have no interest in the vol targeting... It is something I think that clients kind of want, and I know better than going down that route of doing things that clients want." - Jerry Parker voices his strong philosophical opposition to volatility targeting, framing it as a concession to clients that can undermine optimal trading strategy.
• At 6:12 - "As those [risk-free] rates have come down over the years, so has the appetite for a lot of investors out there. They want lower-vol products just because it fits in with their mandates better." - Brian Proctor connects the modern demand for lower-volatility strategies directly to the prolonged low-interest-rate environment.
• At 15:22 - "You just have to have really strict risk management, don't overtrade, take lots of losing trades, don't get out of your winning trades until the trend is confirmed that it's over." - Brian Proctor lists the fundamental principles of discipline and risk management that he learned from the Turtle program.
• At 17:01 - "I don't even know if it would work again, to tell you the truth. These exogenous variables that have kind of truncated trends... they're a problem." - Richard Dennis questions the modern-day applicability of the original Turtle program due to market interventions that shorten trends.

Takeaways

• Prioritize a disciplined, rule-based system over discretionary decisions; your rules are the ultimate protection against emotional errors and market noise.
• Carefully weigh the trade-offs between strategic purity and business pragmatism, recognizing that client-driven demands like volatility targeting may grow assets but can fundamentally alter a strategy's effectiveness.
• Acknowledge that no trading system is permanently effective; commit to continuous research and adaptation to counter evolving market dynamics, such as central bank interventions that alter trend behavior.