Turtle Trading: A Strategic Approach to Trading in NEPSE

In the realm of financial markets, where uncertainty often reigns supreme, having a well-defined strategy can make all the difference between success and failure. One such strategy that has stood the test of time is the Turtle Trading method, renowned for its systematic approach to capturing market trends. In this article, we delve into the art of Turtle Trading, focusing specifically on its buying strategy and how traders can leverage it to navigate the complexities of the stock market.

Understanding Turtle Trading

The Turtle Trading strategy, conceptualized by legendary traders Richard Dennis and William Eckhardt in the 1980s, revolves around the core principle of trend following. At its heart lies the notion that markets exhibit discernible trends over time, and by identifying and riding these trends, traders can secure profitable opportunities.

The Buying Strategy

The buying strategy in Turtle Trading is rooted in disciplined entry rules, position sizing, and risk management. Here's a breakdown of its key components:

1. Entry Rules:

The cornerstone of the Turtle Buying strategy lies in identifying opportune moments to enter the market. This is accomplished through the utilization of the Donchian Channel (DC) indicator, which defines price ranges over a specified period. The entry signals are straightforward:

Breakout above the Highest High: When the price surpasses the highest high of the past “n” days, it triggers a buy signal, indicating a potential uptrend in motion.

Combining moving averages, volume indicators, and moving average convergence divergence (MACD) with Donchian Channels can lead to a more complete picture of the market for a particular stock.

2. Position Sizing:

Integral to the Turtle Trading approach is the concept of position sizing based on volatility. Rather than allocating fixed amounts to each trade, position sizes are dynamically adjusted to reflect the inherent risk of the asset being traded. This ensures that trades are proportionate to the trader's account size and the volatility of the market.

3. Stop-Loss Orders:

In line with prudent risk management principles, stop-loss orders are employed to mitigate potential losses. These orders are strategically placed at a predetermined distance from the entry point, typically based on recent market volatility. If the price retraces beyond this threshold, the stop-loss order is triggered, prompting an exit from the trade. Trailing-stop-loss strategy is often recommended to lock in profits as the trade progresses.

Benefits of the Turtle Buying Strategy

The Turtle Buying strategy offers several advantages to traders:

Systematic Approach: By adhering to predefined rules for entry, position sizing, and risk management, traders can eliminate emotional bias from their decision-making process, fostering a disciplined approach to trading.

Capture Trends: By focusing on buying during upward breakouts, the strategy enables traders to capitalize on emerging trends in the market, potentially yielding substantial profits as prices continue to rise.

Risk Control: Through the use of dynamic position sizing and stop-loss orders, traders can effectively manage risk, limiting potential losses while allowing for the possibility of significant gains.

Major Limitation of the Turtle Buying Strategy

Emotional Challenges: Despite its systematic approach, Turtle Trading strategies may present emotional challenges for traders, particularly during periods of drawdowns or extended market consolidation. The discipline requires adhering to strict entry and exit rules, as well as the patience needed to wait for high-probability setups, which can test traders' psychological resilience. Emotional decision-making, such as abandoning the strategy during periods of underperformance, can lead to impulsive trading and further losses.


Example 1: NEPSE Index

In the above picture, according to the Donchian Channel (DC), the entry point marked as (A) indicates a significant breakout in the index, which the market has validated. At this juncture, traders should consider entering the market at point (A) with a defined profit target, or they could employ a Trailing-Stop-Loss strategy to secure profits. Conversely, the false breakout point denoted as (B) necessitates prudent risk management, requiring the implementation of a Stop-Loss strategy.

Example 2: DORDI

Combining DC, RSI, and MACD, we saw two sets of Buy and Sell signals in DORDI from December 2023 to the month of February 2024.


While Turtle Trading strategies offer a structured approach to capturing market trends, it's essential to recognize its limitations as a lagging indicator and potential drawbacks. The Turtle Buying strategy stands as a beacon of disciplined trading practices. By adhering to systematic entry rules, dynamic position sizing, and prudent risk management, traders can navigate the complexities of the market with confidence. While no strategy can guarantee success, the principles of Turtle Trading offer a time-tested framework for aspiring traders seeking to unlock the potential of the stock market.

Happy Trading

Article By: Astitwa Sharma