In the world of investing, countless people yearn to discover the secrets to wealth growth. Richard Dennis' story stands as a shining beacon, illuminating the path for countless entrepreneurial investors. Over his 19-year trading career, he achieved a 120% compound annual growth rate (CAGR), creating a fortune exceeding $200 million with a mere $400 in capital. His trading philosophy and methods, especially the renowned "Turtle Trading Rules," have become enduring classics in the field of quantitative trading, providing profound inspiration for entrepreneurial investors.
◆ From humble beginnings to a trading legend
In the late 1960s, 19-year-old Richard Dennis worked as a floor runner at the exchange. Driven by his passion and passion for futures trading, he decided to plunge into this field fraught with both risk and opportunity. He scraped together $1,600, borrowing from friends and family. After deducting the cost of purchasing an exchange seat, he was left with only $400 as trading capital. To most, profiting in the futures market with such a meager sum seemed almost unrealistic. However, Dennis, with his unique trading acumen and unwavering conviction, embarked on his legendary journey.
In 1970, a corn pest plague struck. Dennis keenly perceived this market shift and seized the opportunity, quickly turning his $400 capital into $3,000. This success inspired him to drop out of school and devote himself full-time to futures trading. Thereafter, he again demonstrated his exceptional trading prowess during the surge in soybean futures. In 1973, soybean prices suddenly broke through the $4 mark. While most market participants, guided by historical experience, opted to short sell, Dennis, adhering to his principle of trend-following, decisively bought in. As a result, soybean prices skyrocketed, hitting the daily limit for ten consecutive days and tripling in value, reaching a peak of 1,297 cents in just four or five months. Dennis profited handsomely from this success and successfully transitioned to the larger trading arena of the Chicago Mercantile Exchange (CBOT).
◆ Trading Philosophy Illuminates the Path of Investment
• Follow the Trend and Execute with It
Dennis firmly believed in the power of market trends. He believed that the market direction was always correct and that trading should follow the trend; the stronger the trend, the easier it would be to profit. In trading, he never made subjective judgments about high and low price zones, avoiding the risky practice of "selling high and buying low." He deeply understood that investors can only judge the potential direction of the market, but the specific extent of the rise and fall is determined by the market. For example, in the 1973 soybean futures trading, he refused to be swayed by the prevailing bearish sentiment in the market and instead steadfastly followed the trend, resulting in huge profits. This unwavering commitment to trends enabled him to seize key profit opportunities in the market on numerous occasions.
• Technical Analysis, Scientific Decision-Making
Dennis relies primarily on technical analysis when analyzing market trends. He and his partner, William Eckhardt, designed a computer program for automated trading. Technical analysis uses historical price and volume data to predict future market trends. Dennis uses various technical indicators and chart patterns to identify market patterns and signals of changing trends. When the automated trading system aligns with his market inspiration, he strictly follows the system's instructions; when the two diverge, he temporarily exits the market and waits for a more opportune moment. This combination of technical analysis and personal judgment ensures scientific trading decisions while maintaining flexibility.
• Counter-market Psychology, Contrarian Thinking
In the futures market, most people often lose money. Dennis is well aware of this and excels at employing counter-market psychology and contrarian thinking. When the majority of the market holds the same view and operates in the same way, he calmly considers the situation and looks for opportunities that contradict it. This contrarian approach is not blind, but based on his in-depth analysis of market trends and investor sentiment. He understood that when market sentiment was overly optimistic or pessimistic, prices often deviated from their value, creating opportunities for him to profit.
• Strict Risk Control to Guarantee Returns
Risk control was a core element of Dennis's trading philosophy. Early experiences of losing his principal due to trading errors deeply impressed him on the importance of risk control. He set a limit of no more than 2% of his account balance on a single trade and immediately exited the market if he saw no profit for two consecutive weeks. During the 1987 "Black Monday" stock market crash, the Eurodollar's sudden surge resulted in an 80% loss, but he adhered to stop-loss rules and calmly exited the market, avoiding further losses. This strict risk control strategy enabled him to survive market fluctuations and preserve capital for subsequent trades.
• The Turtle Experiment: Passing on Trading Wisdom
To validate the idea that traders can be cultivated, in late 1983 and early 1984, Dennis and his friend William placed a wanted advertisement in the Wall Street Journal, seeking individuals willing to undergo training to become futures traders. They selected 23 candidates from a large pool of applicants and conducted a two-week training program, meticulously teaching them the fundamental concepts of futures trading, along with their own trading methods and principles. Dennis nicknamed these students "Sea Turtles."
During the four-year training program, three of the 23 students dropped out, but the remaining 20 performed exceptionally well, averaging an annual return of around 100% and earning a total of $175 million. The most successful student earned Dennis $31.5 million over the four years. Thus was born the "Turtle Trading Rules," which emphasize trend following, position management, strict stop-loss orders, and letting profits run. This experiment not only proved that trading is a learnable skill, dispelling the traditional notion that trading requires talent or significant capital, but also cultivated a group of exceptional traders whose trading principles and methods have influenced countless subsequent traders.
◆ Lessons for Entrepreneurial Investors
• Adhere to long-termism and pursue compound growth
Dennis achieved an annualized compound growth rate of 120% over 19 years. This astonishing performance is based on his unwavering commitment to long-termism. Venture capital investment also requires long-term goals and avoiding being swayed by short-term fluctuations and temptations. The power of compound interest is immense. Even with limited initial capital, as long as steady growth is maintained, wealth can grow significantly over time. Venture investors should develop long-term investment plans, prioritize the quality of each investment decision, and steadily accumulate successful trading experience and returns to achieve wealth growth.
• Build a Scientific Investment System and Adhere to Trading Discipline
The "Turtle Trading Rules" provide a model for venture investors to develop a scientific investment system. Investors should consider their risk tolerance, investment goals, and market understanding to develop a trading system that suits them, including trend analysis, entry timing, position management, and stop-loss and take-profit strategies. At the same time, like Dennis and his fellow "Turtles," they should adhere to strict trading discipline, overcome human weaknesses, and resist being swayed by emotions. During market fluctuations, strictly follow the instructions of the trading system to avoid making erroneous decisions based on subjective assumptions.
• Continuously learn and reflect to adapt to market changes
The market is constantly changing, and no single trading strategy is infallible. Dennis constantly reflects on his experiences and lessons throughout his trading career. Whether he wins or loses, he carefully reflects, identifies the problems, and applies his successful methods to other markets. Venture investors should also maintain a passion for learning and an open mind, paying close attention to market dynamics and changes, and constantly acquiring new investment knowledge and techniques. They should regularly review their investment activities, analyze the reasons for success and failure, and adjust their investment strategies in a timely manner to adapt to the ever-changing market environment.
Richard Dennis's story reminds us that there are no shortcuts in venture capital investment. However, by learning from and drawing on the experiences of successful individuals, establishing a sound investment philosophy, building a scientific investment system, and maintaining firm conviction and strict discipline, we can achieve success in this challenging field. As Dennis said, "Respect the market, adhere to the rules, and then let the probabilities speak for themselves." May every venture investor find their own unique wealth in the market and realize their investment dreams.
