Turtle Talk - William Eckhardt

Together with Richard Dennis, William Eckhardt taught the group of traders that in the 1980's became known as the Turtles. In his interview in The New Market Wizards, Eckhardt talked about following system rules.

"Your job is to follow the system. If the system does something that results in losses, that's just an expected part of the system. Your judgement might be on the line over the entire performance of your system, but there's no sense in which your judgement is on the line on any single trade."

"I had the experience of simultaneously trading for myself, which is what I've done for most of my career, and also managing an account for an associate, which I traded exclusively on a mechanical system. Although the performance in my account was good, the account trading entirely on a mechanical system definitely did better.

I had known that a good system would outperform me in a windfall year, but I thought I could outperform the system in a mediocre year...this experience indicated otherwise".

"Clearly, my overriding was costing me money, even though I thought otherwise."

"If you find yourself overriding routinely, it's a sure sign that there's something that you want in the system that hasn't been included".

It's interesting that Eckhardt's thoughts are identical to Ed Seykota on these issues - go check out Seykota's interview in Market Wizards for his own take. Eckhardt and Dennis taught the Turtle traders a simple trend following system, and Seykota has been one of the most successful traders (and trend followers) ever. The discretion element revolves defining the parameters you want to use. From that point on, the results over the long run are better when those rules are followed.