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.The rules made a corn unit equal to a gold unit equal to a Coca-Cola unit.This was how Dennis was able to trade markets as num-bers with no fundamental expertise in any of those markets.It wasTable 5.8: Contract Calculation Method Using ATR in $ Terms.ContractsTraded atMarket ATR in $ 2 ATR in $ Account Risk 2 ATR stopCorn $350 $700 $2,000 2.0Lean Hogs $420 $840 $3,000 3.0Japanese Yen $725 $1,500 $1,875 1.0Ten-Year Notes $525 $1,050 $2,000 1.0how the Turtles were able to trade such a wild cross-section of unre-lated markets with only two weeks of training.However, the Turtles learned another use of N beyond a mea-sure of volatility.It was also used as their primary stop (or exit rule, asfirst mentioned with S1 and S2).The Turtles used a 2N stop.This sim-ply means that their primary stop, or hard stop, was two times thedaily N. For example, if there was a breakout in corn, and assuming a clos-ing price of $250, Turtles quickly determined their N stop.If the N was 7 cents, a 2N stop would have been 14 cents.The stop wouldhave been 14 cents behind the entry price.An entry at $250 wouldhave a hard stop at $236 (250 14).You would exit if the stop at pricelevel $236 was touched. No second-guessing.No overthinking.Fol-low the rules.Trading Your Own Account Tip #9:Assume you are trading Google stock and its ATR is 20.A2ATR (2N) stop would be 40.If you lose 40 points on Google,you must exit, no questions asked.TurtleTraderTheRules 85Chart 5.9: Chart Showing Soybean Daily Bars with Daily ATR.Daily price chart of May 2004 Soybean Futures shows a smaller ATR at the begin-ning of the trend.A smaller ATR allows for more contracts to be traded via Turtlemoney-management rules.By the end of the trend, ATR has expanded greatly,reducing the size of the position you can have on.Source: Price-Data.com.On the other hand, a small N allowed Turtles to trade a largerposition or take on more units.Soybean units purchased in August(chart 5.9) at the beginning of the breakout were 2.50 times largerthan units that could have been bought at the end of the trend.Thisexample is a great reminder of the relationship between market vola-tility and unit size: A low N value always means more contracts (orshares).Jerry Parker found that his best trends often start with very low vola-tility at the initial breakout entries.He said, If the recent volatility isvery low, not $5 in gold, but $2.50 in gold, then we re going to throwin a very large position. 15Parker s analysis kept showing that a low N measurement at thetime of entry was a good thing.He said, I can have on a really largeposition.And when volatility is low, it usually means that the marketTurtleTraderTheRules 86has been dead for a while.Everyone hates the market, has had lots oflosers in a row, tight consolidation.And then as it motors throughthose highs, we get on board. 16Unit LimitsIt didn t matter whether the markets were futures, commodities, cur-rencies, FOREX, or stocks.One unit of corn, through the Turtle rules,had now roughly the same risk as one unit of dollars, bonds, sugar, orany other market in the Turtles portfolio.However, the Turtles could not trade unlimited units.Each unit, afterall, represented 2 percent of their limited and finite capital.The Turtleshad unit guidelines to keep them from overtrading.For example, theywere limited to four to five units for any one market traded.Thus, trading like a Turtle could leave you with a $100,000 portfoliothat might have purchased one bond contract, but a $1 million portfo-lio might have purchased five.As the bond contracts gained in value,others would be added.17Examples of Initial Risk DeterminationThe following examples show the basic Turtle trading process in action.1.Assume a trading account of $150,000, risking 1.5 percent oneach trade and seeking to trade Swiss franc futures using a 2Nstop.The Swiss franc has a single N dollar value of $800.$150,000 1.50% $2,2502N stop $1,600The number of contracts to trade on this unit is 1.40, rounded downto 1.2.Assume a trading account of $25,000, risking 2.0 percent oneach trade and seeking to trade mini corn futures using a 3Nstop.Mini corn has a single N dollar value of $70.00.TurtleTraderTheRules 87$25,000 2.0% $5003N stop $210The number of contracts to trade on this unit is 2.38, rounded downto 2.The unit rules make good intuitive sense once the light bulb goesoff.However, that light bulb did not turn on immediately.One Turtledescribed the learning curve: When somebody says, N is volatilityand N is your unit size, I say, How do I know the difference betweenthem? It s really like wrapping yourself around a conundrum, butafter a while it was easy.Pretend I am talking to Liz Cheval, I havegot a half unit on and I am three N up or I have got a half N unit onand I am half N positive
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