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Additional Limit Conditions for Breakout Trading Strategies


  • Cristian PAUNA


One of the most popular trading methods used in financial markets is the Turtle strategy. Long time passed since the middle of 1983 when Richard Dennis and Bill Eckhardt disputed about whether great traders were born or made. To decide the matter, they recruited and trained some traders (the Turtles) and give them real accounts and a complete trading strategy to see which idea is right. That was a breakout trading strategy, meaning they bought when the price exceeded the maximum 20 or 50 days value, and sold when the price fell below the minimum of the same interval. Since then many changes have occurred in financial markets. Electronic trading was widespread released and financial trading has become accessible to everyone. Algorithmic trading became the significant part of the trading decision systems and high-frequency trading pushed the volatility of the financial markets to new and incredible limits nowadays. The orders are built and sent almost instantly by smart computers using advanced mathematical algorithms. With all these changes there are many questions today regarding the breakouts strategies. Are the Turtle rules still functional? How can the Turtle strategy be automated for algorithmic trading? Are the results comparable with other modern trading strategies? After a short display of the history and the system’s rules, this paper will find some answers to all these questions. We will reveal a method to automate a breakout strategy. More different trading strategies originating from the Turtle rules will be presented. A mathematical model to build the trading signals will be described in order to automate the trading process. It was found that all of these rules have a positive expectancy when they are combined with modern limit conditions. The paper will also include trading results obtained with the methods presented in order to compare and to analyze this capital investment methodology adapted especially for algorithmic trading.

Suggested Citation

  • Cristian PAUNA, 2019. "Additional Limit Conditions for Breakout Trading Strategies," Informatica Economica, Academy of Economic Studies - Bucharest, Romania, vol. 23(2), pages 25-33.
  • Handle: RePEc:aes:infoec:v:23:y:2019:i:2:p:25-33

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