Big thanks to Curtis Faith for participating in this week’s StockTwits Midday Q&A, as well as to the many members who submitted questions. Curtis received a flood of questions and did an amazing job getting back to everyone. There was some fantastic insight shared in this conversation.
What follows below is the transcript. Curtis messages via his StockTwits handle @inflector and is a must-follow. Enjoy.
@StockTwits: Welcome to the StockTwits Midday Q&A Chat with Curtis Faith – @inflector. Curtis, thank you for being here.
@inflector: Great to be here.
@chicagosean: When you began your training with Dennis & Eckhardt in 1983, did you know you were part of an “experiment”?
@inflector: No, I thought Rich was training people so we could make money for him. That was part of it but not the whole reason, we learned.
@ZenProfit: Enjoyed your books. Why hasn’t “Turtle 2″ been tried? Is the trading world too different – algo/HFT-rigged now?
@inflector: Training a bunch of traders is hard and you end up having to give away a lot of money. Others have tried something similar – but on a person-by-person basis. Lots of good traders came out of Soros’s group, for example, Niederhoffer, Steve Cohen too. The trading world is very different but it is both easier and harder to trade. The tools are much better. It’s easier to learn. But the easy profits from doing simple things are not as high as they once were. I missed the really good years in the 70s. The type of trading we did still works but you have to take a longer-term perspective.
@ldrogen: how much has been arbitraged out of the original Turtle donchian channel 55/20 strategy, if at all? Do mechanical strategies like the Turtle strategy get massively arbed out of being useful when that are successful?
@inflector: The original 55/20 breakout strategies don’t work very well at all now. Breakouts are arbed pretty heavily. Goes in cycles. Sometimes they work well for a few years, then the arbs hit them and they stop working. The arbs quit and the cycle starts again.
@ZorTrades: do you think the turtle experiment can be done today? and what is the biggest change you see between now and the 70-80’s?
@inflector: Yes, the Turtle experiment could be done today. Different rules and ideas. I would do it completely differently. I would train high-school graduates that had certain personality traits: smart, cool and collected, physics and science kids, add in a few gamers and I’d try and maximize the experimentation on an ongoing basis. Group learning and trading not competing.
@inflector: The biggest change in the markets is the amount of money going into similar strategies. Stocks are easier than commodities now. Breakouts are much fuzzier. They are not crisp indicators of anything like they used to be.
@ZorTrades: Are you still trading today?
@inflector: I’m not trading right now, haven’t in about six months. Working on new software technology for collaboration and writing.
@ivanhoff: how do you find your trading ideas?
@inflector: I like simple trading ideas. So they have to jump out to me on the charts visually. If they don’t do that, I don’t like them.
@1nvestor: Who, or what, has had the greatest influence on you in the past 10 years?
@inflector: The greatest influence on me was teaching an after-school reading program to ghetto kids in St. Thomas, US Virgin Islands. I learned that many of my previously Republican ideas of the reasons for educational failure were wrong. Those kids were smart. I learned that it was the adults failing the children and not fault of parents or students. They learned to read in < one year. This started me on my quest to help make the world a better place.
@derekhernquist: what changes have you noticed in follow-through action of traditional breakouts?
@inflector: Now short-term breakouts are good to fade. This wasn’t the case when I traded as a Turtle.
@chicagosean: Given your experience, what do you think is most important: Sticking to your strategy? Or managing risk?
@inflector: Managing risk is the most important part of a strategy. So it is more important.
@ldrogen: could a simple computer algo trade the original turtle strategy today or was # of lots the most important thing?
@inflector: A computer could trade the system we traded but there are much better easier systems today. Simple MA crossovers for example.
@chicagosean: Are you doing something similar now?
@inflector: I’m an idea guy. I get bored doing the same thing too long. I like variety and I like startups – not growing steady over years.
@ldrogen: is the success of the Turtle program a nod more to “sticking to your strategy”, or the trend following belief itself?
@inflector: Don’t think you can separate the two. Half the Turtles failed. The ones that didn’t stick to the strategy. Trend following works.
@ivanhoff: @inflector @zortrades In terms of collective learning, the Turtle experiment is being done today. It is called StockTwits.
@inflector: Very true. StockTwits is a great place for developing as a trader and a great place for experienced traders to find new ideas.
@chicagosean: Can you take us back to when you were 19-20 years old and making $millions for C&D Commodities. That must’ve been surreal?
@inflector: While a senior in high school. I told my closest friends I’d be a millionaire by 21. Made it by 17 days. It was surreal. But I didn’t feel any different. Still had normal friends. I got married early so that kept me out of the typical scene. It was pretty cool though to have lunch with just Richard Dennis and I in the restaurant at the CBOT. Lots of watchers.
@chicagosean: a 20 year-old bigshot lunching with one of the most successful speculators in Chicago. LOL :)
@inflector: I had my friends (still in college) come out to Tahoe and I’d take them up for a ride in my Baron 58P plane. That was cool. But you get used to the money and it doesn’t really mean so much after the novelty wears off. That’s why I quit. I was bored.
@ZorTrades: when you say longer term perspective, are you now concentrating on weekly charts more than daily?
@inflector: I don’t use weekly charts much, just daily charts over 12 to 18 months. Longer for things like all-time highs perhaps.
@Emini_All_The_Time: lets talk about team collaboration on Stocktwits Desktop and how to team trade better?
@inflector: I’d be happy to come up to NYC and work with StockTwits. I really like teams and collaboration, and technology. The reason I was chosen as a Turtle was because I was writing algo commodity trading systems in 1981. I know software and computers.
@FinanceTrends: Interested in education. Were kids stunted by poor teachers, school structure? Your thoughts on self-education, unschooling?
@inflector: Kids were stunted by poor expectations, poor teachers, poor facilities (no AC), and all the money went to administration.
@ZorTrades: if short term breakouts are a good fade, are you a believer in anticipating breakouts?
@inflector: Anticipating breakouts works better than taking breakouts from my testing. A sizeable difference in expectation.
@ldrogen: can you remember the one signal that you either regret missing most during the program, or didn’t add enough lots?
@inflector: I took every signal. I never missed one. The one thing I regret not doing was not taking off half my silver position in 1987. I always, always, always had the maximum position size when something went. Never once had less than the full load we could do. Some of the other Turtles thought I was overtrading because I was trading an account 10 times their size and I put it on fast. There is a misconception about risk. Some Turtles thought it was riskier to put on the trades quickly. It wasn’t. If you put on the full amount quickly, you had profits when the retracements came and you could ride them out easier.
@eminiexecutors: how do you manage risk in a strategy?
@inflector: I always manage risk by tying volatility to a percentage of account equity. Then limiting my entry risk to a particular %.
@blackbetty: Half the Turtles failed. Did you notice any specific personality traits of those who failed vs those who were successful?
@inflector: The ones who failed either a) made things too hard, or b) wanted the success too badly. Emotional control was key.
@CGChaves: what was your biggest mistake as trader?
@inflector: My biggest mistake was not hiring a small group to trade for me instead of retiring from trading. It would have been easy money.
@CO_Trader Best advice for young traders? Or, the one piece of advice you wish someone would’ve told you when you were first starting out?
@inflector: Best advice for young traders is not to believe anything anyone tells you that doesn’t make sense to you. Trade your own ideas. Listen to others but don’t believe them necessarily. Find your own trading truth. The markets will teach you if you listen.
@derekhernquist: Covel has noted you had your own set of rules. How much leeway did u or anyone else have beyond core strategy?
@inflector: Covel is full of shit. I traded the rules more rigidly than anyone. I was adding faster and bigger than the others, yes. But that is because I a) had much larger funds to trade, and b) I added at 1/2 ATR while others went slower. The rules said 1/2 ATR, not slower. It turns out that slower doesn’t work as well. It is not “more conservative.” It was just a worse expectation way to trade.
@inflector: Covel didn’t actually talk to the most successful Turtles or to Dennis or Eckhardt. He hates me because I called him out. And gave away the rules to the Turtle System he was selling for $995.
@ZorTrades: favorite trading/investing/financial book?
@inflector: Reminisences of a Stock Operator by Edwin LeFevre is what got me to want to be a trader. Still my favorite.
@ZorTrades: Do you care if a company makes money or not?
@inflector: A good technical trader only cares about liquidity and the price chart.
@rossgreenspan: what was your most memorable trade as a Turtle?
@inflector: My most memorable trade was the Heating Oil trade of my first month trading. Made about 100% in two weeks. The best any of the other Turtles did was about 25%. I followed the rules. They didn’t. The net result was that instead of $1 million after the training month like we were told. I got a $2 million account. More than half of the other Turtles didn’t even take that trade because it was too “risky.”
@FinanceTrends: Of best traders you saw, what were some similarities in their risk management & position sizing if any? Psychology?
@inflector: All the best traders manage their risk very carefully. They use different position sizing rules but they all have rules.
@jaykza: was your system traded on a single time frame (daily) or did you ever trade it intraday?
@inflector: We only traded the system using daily charts. We didn’t even have charting software. We had to draw the charts manually on paper.
@jaykza: thank you! would love to hear your thoughts on the differences you see in trading stocks vs. commodities?
@inflector: The biggest difference between stocks and commodities is the correlation. Stocks are much more highly correlated. So with stocks you need to trade “the market” at the same time you trade any given stock. Especially for swing trading.
@StockTwis: Curtis @inflector, thank you for participating.
Compiled by Sean McLaughlin: Editor, StockTwits (@chicagosean)
StockTwits® is an open, community-powered idea and information service for investments. Users can eavesdrop on traders and investors, or contribute to the conversation and build their reputation as savvy market wizards. The service takes financial related data and structures it by stock, user, reputation, etc. More »