Could a bet change your life?
And I’m not talking about playing lotteries or backing horses…
I mean, could a challenge between two people seriously impact the way you trade?
Well, the answer is: yes.
I’m going to tell you an inspiring story this week. It’s about a group of everyday people who made $175 million in the markets. And the best bit is, it’s a true story.
Most of the people you’ll hear about began with no experience. They came from all walks of life…regular people with regular jobs. But with the right mentor, they made fortunes.
I’ll tell you how they did it in a minute.
But first, I have a challenge for you…
OK, see if you can recognise these lines:
‘We took a perfectly useless psychopath like Valentine, and turned him into a successful futures trader. And during the same time, we turned an honest, hard-working man into a violently, deranged, would-be killer!’
These were the words of Randolph Duke in the 1983 move Trading Places.
Now, Randolph and his brother Mortimer were commodity brokers. And just for fun, the Dukes had a bet to see if they could change the course of a person’s life.
You see, Randolph thought success or failure was largely due to luck…he thought anyone could do well…it was all to do with being in the right place at the right time.
His brother, on the other hand, said a person is born to either rise or fall.
Well, it turned out that Randolph was right…it was all down to chance.
The Dukes were able to turn a down-and-out street hustler into a successful futures trader. At the same time, the brothers took a high-flying executive and ruined his career.
Now, Trading Places isn’t based on a true story — it’s pure Hollywood make-believe. But the film does lightly touch on the question of nature versus nurture.
So are successful traders born, or can anyone learn to excel?
I’ll come back to this in a moment (the answer might surprise you).
But first, let me tell you about a real life version of the Duke’s experiment…
It’s nurture, not nature
The year was 1994, and I was now a fully-fledged trader. My boss at the time was a man called Carlos…a senior trader who’d been at Bankers Trust for many years.
I’ll always remember Carlos’ comment one morning. As I arrived for work, he said:
‘Jason, we’re going to become turtles.’
I had no idea what Carlos was talking about. I could only guess it was a joke. Maybe it was a funny way of saying volatility was picking up and we should hunker down.
But I wasn’t even close!
Carlos was saying we were going to learn about the ‘Turtles’ — a secretive group of traders.
You see, the Turtles were the result of an experiment. It began in 1983 following a discussion by two legendary traders — Richard Dennis and William Eckhardt.
The men were discussing factors that make a top trader. Dennis’ view was that he could teach almost anyone to trade profitably, while Eckhardt said trading skill was a special gift.
And just like in Trading Places, the men had a bet to test who was right.
The name ‘Turtles’ comes from the turtle farms Dennis had seen in Singapore. He thought he could produce traders in the same efficient way the farms were breeding turtles.
Dennis placed an ad for traders in the Wall Street Journal…no experience required. Over 1,000 replies came flooding back. Of these, just 14 made it into the project’s initial intake.
The group was an eclectic mix of characters…
There was a blackjack player, a security guard, a Dungeon & Dragons expert, an actor, a linguistic PhD, a state chess champion, an accountant and several with trading backgrounds.
The common theme was that they all enjoyed games of chance and strategy.
Dennis’ view was that successful trading involves following a set of rules. He thought just about anyone could learn these rules and make money from the markets.
Another name for a set of rules is a system — a consistent process that removes uncertainty from decision making. A system’s buy and sell orders are made according to the rules.
You see, systems have no room for emotion, gut feel, or second guessing. The key is to have the discipline to follow the rules. Ignoring the system was a deal breaker for Dennis.
The Turtles were told it was OK to lose money, as long as they followed the rules. But if they broke the rules, then they were out of the group — even if the outcome was profitable.
It was a case of follow the system without question.
The Turtles began with two weeks of intensive training. Dennis then gave each of them $2 million of his own money, and let them loose on the markets.
Now, you may be thinking this all sounds pretty simple. Using a set of rules to trade with someone else’s money doesn’t seem like a difficult task — all they had to do was follow the system.
But some people couldn’t do this…
You see, a few of the turtles regularly bent or ignored the rules. These people didn’t have the self-control to be successful. And they often lost money as a result.
So does this mean Dennis lost the bet?
Not at all. The overall experiment was a success.
A former trainee says the Turtles made over $175 million in five years. And more than 30% of the 14 original Turtles went onto hugely successful trading careers.
It’s been said that one of the Turtles — Jerry Parker — has a net worth exceeding $1 billion. His success is largely the result of being able to follow trading rules.
Now, I can’t promise you a one in 14 shot at becoming a billionaire. That’s a big ask!
But I can teach you about the strategies and tactics that contribute to success. That’s what these weekly articles are all about. I want you to become a more skilful and confident trader.
The Turtle experiment shows that everyday people can become successful traders. The key is to find the right process, and then have the discipline to stick to the rules.
There’s no doubt about it, amazing things are possible when you know what to do.
Until next week,
Editor, Quant Trader
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