Richard Dennis: The Prince of the Pit and the Turtle Traders

In the early 1970s, a young man from Chicago borrowed $1,600 from his family. $1,200 went straight into a seat at the MidAmerica Commodity Exchange, and $400 was left to trade. A few years later the same man made about $500,000 on a single year of soybean trading. His name is Richard Dennis, and the trading world still knows him as the “Prince of the Pit”.

Dennis did not become famous for his profits, but for a bet. He claimed that trading could be taught like a craft, and out of that bet came the Turtle traders in 1983. This article shows you which of the circulating numbers are documented, how the system worked, why Dennis lost tens of millions of dollars in 1987 and 1988, and what you can take from it as a trader. This article follows our editorial policy.

Richard Dennis in 30 seconds

• Started with $400: Dennis borrowed $1,600, paid $1,200 for the exchange seat and traded the rest. By 1973 his capital was over $100,000.
• The Turtle experiment began in December 1983: 13 beginners got two weeks of training and then real accounts. According to the original rules, they earned an average of 80% a year over the following four years.
• The collapse came in 1987 and 1988: Dennis reportedly lost $10 million in the October 1987 crash and about $50 million over both years. In the spring of 1988 he stopped managing money for others.
• Fortune figures are estimates: the Wall Street Journal estimated in 1989 that he had turned $400 into about $200 million in 18 years. Higher figures online have no primary source.

Who is Richard Dennis?

Richard Dennis is an American commodity trader who built a fortune on the Chicago futures exchanges from $400 of trading capital and showed with the Turtle experiment in 1983 that rule-based trading can be taught.

He was born in Chicago in January 1949. He studied philosophy at DePaul University and turned down a scholarship for graduate study at Tulane. He learned his trade not at university but in floor trading: Dennis traded commodity futures, standardized contracts on goods such as soybeans, corn or interest rate securities. His nickname “Prince of the Pit” comes from this time in the trading pit; the New York Times Magazine used it as a headline in 1976.

One mix-up you should know about: search engines sometimes confuse the trader with an economist of the same name. If you come across books on monetary policy, they do not belong to the trader Richard Dennis. How he compares with other legends is in our ranking of the best traders in the world.

From runner to millionaire: Dennis’ path through the Chicago pits

Dennis started as a runner at the Chicago Mercantile Exchange at 17. He was too young to trade for himself, because the exchange required traders to be 21. So he traded at the smaller MidAmerica Commodity Exchange and had his father stand in the pit for him. This arrangement gave him a head start of several years in practice, while people his age were still studying.

The trading pit was the area of a futures exchange where traders made deals directly with each other by open outcry and hand signals.

The capital curve of the early years is well documented. The $400 grew to about $3,000 in 1970. By 1973 his account was over $100,000. In 1974 came the breakthrough with a profit of about $500,000 in soybeans, which made Dennis a millionaire before he turned 26. In the late 1970s he bought a full membership at the Chicago Board of Trade.

This career is a child of its time. In the floor trading of the 1970s, speed in the pit decided profits, not the computing power of a server. And the inflationary markets of that decade produced long, clean trends. Such a rise would hardly be repeatable under today’s conditions, because the same niche is now occupied by algorithms working in milliseconds.

The bet with William Eckhardt: how the Turtle traders began

In 1983, Dennis argued with his long-time friend and business partner William Eckhardt, a mathematician, about a simple question: are great traders born or made? Eckhardt believed talent was decisive. Dennis was convinced he could train people with no experience into successful traders. Instead of arguing further, the two turned it into an experiment.

The Turtle experiment was a training trial by Richard Dennis and William Eckhardt in which beginners traded real money with a fixed trend-following rulebook after two weeks of training, starting in December 1983.

The process is documented in the “Original Turtle Trading Rules”, which several participants published for free in 2003. Dennis placed ads in Barron’s, the Wall Street Journal and the New York Times. More than 1,000 people applied, he invited 80 to interviews and chose 10. Because Dennis added three people he already knew, the first class started with 13. Training took place in Chicago at the end of December 1983. In January 1984 the Turtles traded small accounts, from February most of them traded accounts of $500,000 to $2 million. A second class followed a year later.

The name came from a trip to Asia. According to the Wall Street Journal, Dennis described his plan with the words: “We are going to grow traders just like they grow turtles in Singapore.” In 1989 the same paper quoted him as saying that trading was even more teachable than he had expected. According to the original rules, the Turtles earned an average of 80% a year over the following four years. How the rules work in detail is in our guide to Turtle trading.

The Turtle system in five building blocks

Turtle trading is a fully mechanical trend-following system for futures markets that buys breakouts from 20-day or 55-day highs, sets position size by market volatility and replaces every decision with a fixed rule.

N is the Turtles’ measure of market volatility: an average of the true range over 20 days, today known as the average true range (ATR). Each unit was sized so that a move of 1 N equaled 1% of the account.

Dennis did not give his students gut feeling, but a complete set of rules. Five building blocks carry the system:

• Markets: only liquid futures markets, including interest rates, currencies, metals, energy and agricultural commodities. Illiquid contracts were left out, because there the execution eats up the edge.
• Entry: buy on a breakout above the 20-day high (System 1) or the 55-day high (System 2), sell short the mirror image below the low. The idea goes back to the channel technique of Richard Donchian.
• Position size: a unit was sized so that a 1 N move cost 1% of the account. So the size of every position was fixed before anyone had an opinion about the market.
• Stop: no unit could risk more than 2%, so its stop was 2 N from the entry. On top came limits of 4 units per market, 6 in closely correlated markets, 10 in loosely correlated markets and 12 in one direction. How to apply such limits to your own trading is in our guide to risk management.
• Exit in profit: System 1 exited on a 10-day breakout in the opposite direction, System 2 on a 20-day breakout. According to the Turtles, this was the hardest part, because it means giving back large paper profits.

The limit of the system lies in this last point. Whoever cannot stand the exits is no longer trading a Turtle system, but an arbitrary variation of it. That is where most imitators fail, not on the formula.

What Richard Dennis really made: the numbers by source

Few traders have as many numbers circulating about them as Dennis, and few of those numbers have a reliable source. So we sort them by origin rather than size. Only figures from the original rules, contemporary newspaper reports and the documented biography count as facts here; everything else stays an attribution.

Figure	Source	Value
Trading capital at the start	biography (NYT Magazine 1976, Wikipedia)	$400
Soybean profit (1974)	biography	about $500,000
Turtle accounts from February 1984	Original Turtle Trading Rules	$500,000 to $2 million
Turtle return over four years	Original Turtle Trading Rules	80% a year
Turtle return over 4 1/2 years (14 traders)	Wall Street Journal, Sept. 5, 1989	80% a year, compound
Dennis’ fortune after 18 years	Wall Street Journal, 1989	“estimated $200 million or so”
Turtle profits over five years	reported, no primary source	$175 million
Annual return over about 19 years	widely shared infographic, no source	about 120%

One number deserves special caution. Online, Dennis is often credited with an average annual return of about 120% over about 19 years, frequently called the highest long-term figure ever. We found no primary source for it. It comes from a widely copied infographic. It also covers only the time before his loss years and hides what happened afterwards.

A better sense of scale comes from comparing him with other legends. Jack Schwager’s Market Wizards interviews with traders of the same era show that top years with triple-digit returns were not rare in the futures markets of the 1970s and 1980s. Lasting repeatability was.

1987 and 1988: when the drawdown caught up with the inventor

October 1987 hit the Turtles at a particularly sensitive point. After the crash they were long interest rate futures: Eurodollars, T-bills and bonds. When the Federal Reserve cut rates sharply overnight to restore confidence, these positions turned against them the next day. The original rules put the one-day losses of some Turtles at 20% to 40% of account equity. Without the built-in position limits, the damage would have been even greater.

Dennis himself reportedly lost $10 million in the October 1987 crash. For 1987 and 1988 together, losses of about $50 million are reported. In the spring of 1988 he stopped managing money for others after his clients suffered heavy losses. In 1990 his firm settled investor complaints for more than $2.5 million without admitting or denying wrongdoing. He returned in 1994 with the Dennis Trading Group, and in the summer of 2000 that fund closed after losses too.

A drawdown is the fall from the highest account balance to the lowest point afterwards, measured in percent of capital.

For a trend-following system, a deep drawdown is not an accident but part of the design. Such a system makes its money in a few large moves and keeps losing small amounts in between.

I lived through the autumn of 1987 as an active trader. What made that phase so dangerous was not the direction of prices, but the speed at which orderly markets turned into price gaps. A mechanical system cannot execute its own stops at the calculated prices on such days. That is the difference between a backtest and a real account.

What traders can learn from Richard Dennis

I trade with discretion, based on price action, not mechanically, so I look at the Turtle system from the outside. From that distance, five points remain that work regardless of style:

• Rules beat opinions, but only with discipline: the experiment proves that a fixed set of rules turned beginners into usable traders. It does not prove that everyone sticks to those rules. Several Turtles deviated and did much worse.
• Position size is the real lever: the core of the Turtle math was never the entry signal but tying every unit to 1% of the account. A mediocre signal with clean sizing survives longer than a good signal without it. Our guide to position sizing shows the calculation.
• A system without a loss plan is not a system: the limits for correlated markets acted like an airbag in 1987. Whoever defines only entries and ignores correlations holds the same position five times when it matters.
• Success depended on the market phase: the Turtle years fell into a period of long, clean trends in commodity and interest rate markets. No set of rules creates trends, it can only collect them when they exist.
• The inventor is not the best user: Dennis lost more with his own and other people’s money than most of his students ever managed. To judge an approach, the rule counts, not the reputation of its author.

Does Turtle trading still work today?

The honest answer has two parts. The principle lives on: trend following is still the basis of many professional managed futures programs, and breakouts from highs of several weeks still produce moves. The original rules in unchanged form, however, are no longer a sure thing.

Dennis stood in a line that was forty years older. Jesse Livermore already bought only after the breakout, added only to winning positions and limited losses with a fixed threshold. The difference lies in the execution: Livermore decided anew every time, Dennis wrote the rules down and had beginners follow them.

Three things have shifted since 1984. The rules have been public since 2003, so there is no head start from knowledge any more. Many markets move sideways more often, and there a breakout system produces false signals. And the Turtles’ account sizes allowed diversification across twenty or more markets, which a small private account cannot replicate. Whoever trades a Turtle system with $10,000 on three markets is trading a different strategy from 1984, even if the formulas are identical.

Linda Bradford Raschke later turned the Turtle logic around. Her setup “Turtle Soup” trades exactly the failed breakouts on which the Turtles lost money.

Conclusion: a legend you should read correctly

Richard Dennis proved two things, and only one of them is told often. He showed that trading can be taught if the rules are complete and the students follow them. He showed just as clearly that the same rules do not protect their inventor from losing tens of millions once market conditions turn.

What convinces me about this story is less the return than the structure. Sizing by volatility, hard limits for correlated positions and a defined exit are tools that also work in a discretionary approach. The numbers about Dennis’ fortune, on the other hand, you should read with distance: they are story, not evidence. Whoever shortens the Turtle story to “from $400 to millions” has left out the instructive part.

Frequently asked questions about Richard Dennis

Who is Richard Dennis?

Richard Dennis is an American commodity trader, born in Chicago in January 1949. From 1970 he built a fortune on the Chicago futures exchanges from $400 of trading capital and started the Turtle experiment in 1983.

How much money did Richard Dennis make?

Documented are a profit of about $500,000 in soybeans in 1974 and his rise to millionaire before the age of 26. In 1989 the Wall Street Journal estimated that he had turned $400 into about $200 million in 18 years. Higher figures online cannot be traced to a primary source.

Did Richard Dennis make 120% a year?

We found no primary source for that figure. It comes from a widely shared infographic. Documented is the 80% a year that his Turtle traders earned over four years according to their own rules document.

Who was William Eckhardt?

William Eckhardt is a mathematician and was Dennis’ business partner. He took the opposing side in the original question and believed talent was decisive. Together they launched the Turtle experiment in 1983.

Why were the students called “Turtles”?

Dennis described his plan after a trip to Asia with the image of a turtle farm in Singapore. He would grow traders the way turtles were bred there. The nickname stuck to the first class of 13 participants and the second class that followed.

Is Turtle trading still profitable today?

The principle of trend following still works, but the original rules in unchanged form are no sure thing. The rules have been public since 2003, many markets move sideways more often, and the necessary diversification across twenty markets is not possible with small accounts.

What happened to Richard Dennis’ fund?

After heavy client losses, Dennis stopped managing money for others in the spring of 1988. In 1990 his firm settled investor complaints for more than $2.5 million. A later fund, the Dennis Trading Group, closed after losses in the summer of 2000.