Modified turtle soup

By Volker Knapp
The “turtle soup” pattern was introduced in the book Street Smarts by Linda Raschke and Larry Connors. The name came from the strategy’s goal of turning a well-known trend-following approach on its head — the medium- to longer-term breakout strategy attributed to the “Turtles,” the group of traders trained by Richard Dennis and William Eckhardt in the 1980s, some of whom went on to found successful trading operations.

Trend-following system winning percentages are usually below 40 percent, but these systems can ultimately prosper because of their high payoff ratios (the absolute value of the average winning trade divided by the average losing trade). A breakout system’s low winning percentage means there is a higher frequency of false breakouts and short-term reversals; an approach that can capitalize on these moves should result in a relatively high-probability system.


For the complete article, see the December 2009 issue of Active Trader magazine. Click here to subscribe.

(Note: PDF versions of most articles are available through the Active Trader article store a month after publication.)

|

|