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Strategy Playbooks
Trend · Intermediate

Turtle Donchian Breakout

Buy new highs, cut losers fast, let winners run.

Backtest this playbook
Origin: Richard Donchian’s channels; the Turtle Traders of Richard Dennis and William Eckhardt (1983)
Session
Daily close
Timeframes
1d (also 4h)
Markets
Gold (GLD), Index futures, Commodities, FX
Reward
Open-ended — a few large winners pay for many small losers
IllustrationPrior 20-day highPrior 10-day low (exit)
180.0190.0200.0210.0Stop 2N 183.9BreakoutExit signal
Daily sketch. The close above the 188.5 channel triggers a long at 189.6 with a 2N stop at 183.9. The trend runs above 206; the position exits at 199.8 the morning after a close below the 10-day low — about 1.8R, after giving back part of the move by design.

Why it works

The Turtle system is the archetype of trend following. It is right less than half the time, but its winners are large because the exit trails far behind price. It teaches you to let the rules, not your feelings, run the position.

The rules

01Setup

  • Track the highest high and lowest low of the previous 20 bars.

02Entry

  • Long when the close exceeds the prior 20-bar high; short when it breaks the prior 20-bar low.
  • Enter at the next open.

03Stop

  • 2× ATR(20) from the signal close — the Turtles’ “2N” stop.

04Target

  • No fixed target. Exit when price closes below the prior 10-bar low (above the 10-bar high for shorts).

05Management

  • Size so that 1N of movement equals 1% of equity. Turtle units equalise risk across markets.

06Invalidation

  • The stop or the 10-bar exit, whichever comes first.

Common mistakes

  • Taking profit early because the open gain feels large
  • Skipping signals after a losing streak — the winner you skip pays for the year
  • Trading too few markets — trend following needs diversification

Educational material, not financial advice. The illustration is a sketch of the rules, not a historical trade. Results in the backtester are hypothetical and do not guarantee future performance.