The TurtleStrategyMT4 EA V1.2, pioneered by Richard Dennis and William Eckhardt in the 1980s, is one of the most iconic trend-following strategies in trading history. Designed to prove that trading could be taught to novices, the system turned a group of inexperienced traders—known as the “Turtles”—into millionaires, generating over $100 million in profits. The TurtleStrategyMT4 EA V1.2 is an Expert Advisor (EA) for MetaTrader 4 that aims to bring this legendary system to modern forex traders. In this 600-word blog post, we’ll explore the core principles of the Turtle Trading System, how the TurtleStrategyMT4 EA V1.2 implements these rules, its key features, and practical considerations for traders looking to use this tool.
The TurtleStrategyMT4 EA V1.2: A Brief Overview
The TurtleStrategyMT4 EA V1.2 is a mechanical, trend-following strategy that capitalizes on breakouts in price action. Richard Dennis believed that anyone could succeed with a disciplined set of rules, while Eckhardt argued that trading success was innate. Their experiment in 1983-84 trained 23 novices for two weeks, gave them trading accounts, and let them loose. The results were staggering, with the Turtles averaging 80% annual returns.
The system revolves around a few core principles:
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Breakout Entries: Trades are initiated when the price breaks above or below a specific high or low over a defined period (e.g., 20-day or 55-day breakouts).
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Volatility-Based Position Sizing: Position sizes are calculated using the Average True Range (ATR) to adjust for market volatility, ensuring consistent risk across trades.
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Pyramiding: Additional positions are added as the trend continues, typically at intervals of half the ATR, to maximize profits during strong trends.
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Stop Losses and Exits: Initial stop losses are set at twice the ATR (2N), and trades are exited on opposite breakouts (e.g., a 10-day or 20-day low/high for long/short positions).
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Risk Management: The system allocates 2% risk per trade, with adjustments during drawdowns to protect capital.
The TurtleStrategyMT4 EA V1.2 automates these rules, making it accessible to traders without requiring constant manual intervention.
Features of TurtleStrategyMT4 EA V1.2
The TurtleStrategyMT4 EA V1.2 is designed to replicate the original Turtle Trading System with modern optimizations for the MetaTrader 4 platform. Here are its key features, based on available information and typical implementations of Turtle-based EAs:
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Dual Breakout Systems:
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System 1: Trades on 20-day breakouts, exiting on 10-day breakouts in the opposite direction.
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System 2: Trades on 55-day breakouts, exiting on 20-day breakouts. This longer-term system captures more significant trends.
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The EA allows traders to customize the breakout periods, offering flexibility to adapt to different market conditions.
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Volatility-Based Position Sizing:
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The EA uses the 30-day ATR (referred to as “N” in Turtle terminology) to calculate position sizes. This ensures that trades are scaled according to market volatility, maintaining consistent risk.
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For example, a trade risking 2% of a $10,000 account would adjust lot sizes based on the ATR of the traded pair, such as EURUSD.
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Pyramiding and Trailing Stops:
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The EA supports pyramiding, allowing up to four additional positions at intervals of ATR(30)/2. This maximizes profits during sustained trends.
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Trailing stops are applied using Ask/Bid +/- ATR(30)*2, locking in profits as the trend progresses.
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Risk Management:
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The EA reduces risk by 10% for every 20% account drawdown, protecting capital during losing streaks.
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Traders can customize risk settings, such as the percentage of capital risked per trade.
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Customizable Parameters:
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The EA offers adjustable settings for breakout periods, ATR multiples, moving average filters, and trailing stops. This allows traders to optimize the strategy for specific currency pairs or market conditions.
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Broker Compatibility:
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It works with ECN and non-ECN brokers, supporting 2-5 digit symbols and various instruments, including forex and CFDs.
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Performance Insights from Backtests
Backtesting results shared on platforms like Forex Factory provide insight into the EA’s potential. For instance, a test on EURUSD (2000-2020) with a $10,000 balance, 0.8 pip spread, 0.5% risk per trade, and 2% total risk yielded:
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+54% return with ATR Multiple = 3, no moving average filter, and no trailing stop.
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+78% return with ATR Multiple = 2, no moving average filter.
These results suggest that the EA can perform well over long periods, but the 20-year timeframe equates to roughly 2-4% annual returns, which may not impress all traders. Testing with a moving average filter (e.g., 100-period LMA, 50-period SMA) and multiple currency pairs could enhance returns, potentially reaching 20-30% annually with a diversified portfolio.
However, backtests have limitations. The EA’s performance depends on quality historical data, and false breakouts can erode profits, as noted in some implementations. Traders should conduct thorough backtesting and forward testing on demo accounts to validate performance.
Practical Considerations for Traders
Before using TurtleStrategyMT4 EA V1.2, consider the following:
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Market Conditions: The Turtle system thrives in trending markets but struggles in ranging conditions, leading to frequent small losses from false breakouts. Adding filters like moving averages or ADX can reduce false signals.
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Broker Selection: Ensure your broker supports low spreads and reliable execution, as high spreads can diminish returns.
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Minimum Deposit: A minimum deposit of $500 is recommended for running the EA on M15 charts, though higher balances allow for better risk management.
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Customization: Optimize settings in the MetaTrader 4 strategy tester for your preferred pairs and timeframes. For example, testing on EURUSD, GBPUSD, or a basket of 10-15 pairs can diversify risk.
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Discipline: The Turtle system emphasizes consistency and discipline, as Richard Dennis noted: “You could publish my trading rules in the newspaper and no one would follow them. The key is CONSISTENCY and DISCIPLINE.” Avoid overriding the EA’s rules during drawdowns.
Challenges and Limitations
While the TurtleStrategyMT4 EA V1.2 offers a robust framework, it’s not without challenges:
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Outdated Rules: Financial markets have evolved since the 1980s, and the original Turtle rules may not perform as well in today’s volatile forex markets.
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False Breakouts: The system’s reliance on breakouts can lead to losses in choppy markets, requiring additional filters.
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Backtesting Accuracy: Poor historical data can skew results, as noted in some tests.
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Complexity: While the EA automates trading, understanding and optimizing its parameters requires experience.
Conclusion
The TurtleStrategyMT4 EA V1.2 brings the time-tested Turtle Trading System to MetaTrader 4, offering traders a disciplined, trend-following approach to forex trading. With features like dual breakout systems, volatility-based sizing, and customizable parameters, it provides a solid foundation for capturing trends. However, its success depends on careful optimization, robust backtesting, and adaptation to modern market conditions. For traders willing to embrace its principles of consistency and discipline, the EA can be a powerful tool, but it’s not a set-and-forget solution. Start with a demo account, test thoroughly, and consider diversifying across multiple pairs to maximize its potential.
