Way of The Turtle - Book Review

I just finished reading my copy of Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders and wanted to do a quick review of the book for those of you that might not have heard much about it yet.

For those of you that are not familiar with the book and the story behind it, it was written by Curtis Faith, who was one of the original “turtles” who learned to trade a specific system in the commodities markets. The program was run by Richard Dennis and William Eckhardt.

First off, this book is structured differently from your average trading book. Instead of pages and pages of charts with setup examples and calculations of trading statistics, Way of The Turtle does an excellent job of blending the details of what he has learned in during his trading career with anctedotes and descriptions of what it was like to participate in the turtle training process and trade a mutimillion dollar account for Richard Dennis still in his early 20’s. If you imagine one of the interviews in Market Wizards and turn that in to a full length book where the subject walks you through everything they have done and learned about trading to reach that point, you’ll have a good idea of how Way of The Turtle Reads.

Curtis does an excellent job of revealing exactly how the Turtles were taught, the rules they used, the markets they traded and provides some great insights into why there was so much discrepancy in performance among the turtles, whom were all taught the same rules, allowed to trade the same markets, and worked very close to each other. Outside of the turtle story, the book also contains very detailed information relating to market selection, money management, order entry and system development. There are also some very interesting backtest results of how different “trend following” systems have performed in the most recent decade on a portfolio of futures. The performance of these relatively “simple” systems may suprise you.

This was also the first trading book I had read that distinguished between drawdowns that occur in open and profitable positions and drawdowns that occur from entry (ie unprofitable positions), which I feel is an extremely underdiscussed distinction. When Dave and I work on systems, we will spend time analyzing the individual trades and the equity curve to determine what type of drawdowns the system is actually experiencing since there is a large difference between a 20% drawdown on a portfolio that has 90% worth of open profits and a 20% drawdown on a portfolio with 0% worth of open profits. This is especially important with regards to position sizing as large drawdowns from your cash equity will quickly cause you to reduce position size, thus making it much harder to reach new equity highs.

My only qualm with the book is the use of the word “secret” in the subtitle as it implies there is some type of “secret” contained inside. Of course as any serious trader knows, there aren’t any secret formulas or systems that are surefire paths to riches, the only path is a trading system with an edge, strong money management, psychological discipline and consistency. This is exactly what is described in the book, which is why I question the use of the word in the subtitle.

Overall, I thoroughly enjoyed this book and highly recommend it to traders of all skill level. It’s one of the few trading books I’ve read that’s written by person who has actually succeeded in trading at such a high level. This comes through in the book because instead of using theoretical examples to highlight examples of large winning and losing trades, the author is able to recall specific trades he’s actually made that netted or lost millions of dollars. I felt this added a degree of authenticity that is lacking from many other books.

I also recommend that you visit Curtis Faith’s new blog related to the book. He also has a couple posts about what it was like to write the book here and here.

- John