Russell Sands Responds To His Critics
-
If
you’re such a good trader, why do you teach seminars
- Russell was fired from the Turtle program
for not following the rules, and never made any money trading
- Russell quit trading two years ago, saying
the system didn’t work any longer because things had changed
- Richard Dennis blew up two trading funds
- Other people are willing to sell the
Turtle system for less money (or for more money)
- The Turtle system has very bad draw downs
- The Turtle system just doesn’t
work any more
1.
If you’re such a good trader, why do you teach seminars
Well, I could give you a whole bunch of charitable talk about
how I enjoy helping people,
which is true, but the real crux of the matter is that the
most important reason is money.
I have some valuable information, I am a good teacher,
and people are willing to pay me for it.
I am a real (and profitable) trader, but even the best traders
in the world go through some
losing periods. Teaching is guaranteed income, with no variance,
and no drawdowns.
I run a business and finance a household, and have expenses
to pay every month. I cannot very
well tell my programmer or my banker that I will pay them
their salary or mortgage payment the
next time I catch a big trade (whenever that may be). Also,
if the teaching income allows me
to pay all my business and living expenses, then I can allow
the trading profits to build up
and accumulate in my account.
And finally, people tend to like to do what they’re
good at, and I happen to be very good at
teaching. Maybe better than I am at trading. Many people, from
large money managers to exchange executives, have said so. I
still think I’m a pretty good trader, with over twenty
years experience and still going strong. But you know, some
of the best hitting and pitching coaches in baseball were only
‘average’ players. So even if my trading track record
is not hall of fame material, that doesn’t mean I am not
well qualified to teach others.
I also like to make money. And my time is valuable.
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2. Russell was fired from the Turtle
program for not following the rules, and never made any money
trading
There has always been a lot of controversy surrounding this
rumor, and the truth of the matter is that I never was fired,
but that I resigned. And my disagreements, if any, with Richard
Dennis, had nothing to do with not following the rules.
I resigned over a difference of opinion as to what was ‘secret’
information and what was common sense. I came to this job with
more experience than most, and it was common sense to me that
you trade larger volatility positions with smaller size, and
vice versa. I was overheard discussing this with some of my
option trading friends one day after work, and all of a sudden
I was accused of leaking out proprietary information. I thought
it was silly then, and twenty years later, I still think it’s
silly.
As for not making any money, well, 1984 was a tough year. The
markets were choppy, and nobody made any money for about the
first nine months of the year. Rich himself lost money, and
kept telling everyone else that losing money was not an indication
of doing anything wrong. In fact, at one point he even came
in and said that anybody who was making money at that time was
probably doing something wrong (not following the rules).
Of course, extrapolating what happened in a nine month period
over twenty years ago into saying that I have never made any
money trading, is also pretty silly. If I didn’t start
making good money at some point, how could I possibly have any
credibility to still be in this business.
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3. Russell Sands was fined by the
NFA
When futures and commodities brokers see this they understand
fully - brokers are fined almost incessantly. floor traders
of the SFE were fined for swearing in the pit. One Australian
trader I heard of was fined for writing his orders in Blue Pen
not Black Pen as per the rule. Just to put things in perspective,
Merrill Lynch and Goldman Sachs and a bunch of other large brokerage
firms were recently fined over several hundred million dollars
for order execution infractions, but they still seem to be in
business as well.
Yes, it’s true. In 1997, I was fined $20,000 by the NFA
Business Conduct Committee for misleading advertising material
for one of my seminars. I had produced a graph with a five year
track record of my nightly Turtle hotline. The first year was
a computer generated model, and the next four years were the
results of an actual account I had set up. However, the graph
did not have the accompanying hypothetical boiler plate disclaimer
underneath it. Big deal ! In fact, The NFA prosecutor in the
case, Ron Hurst, did not think this was such an egregious violation
either, and approached my attorneys before the hearing with
an offer to settle the case, but I refused because I wanted
to explain my side of it and be completely exonerated. Considering
that the NFA needs to justify (and pay for) its existence, this
was pretty naive on my part.
The simple truth is, given the (sometimes ridiculous) regulatory
environment in this country, any large entity is going to at
some point encounter minor infractions in the course of doing
regular business. I paid my fine, considered it a frustrating
cost of doing business, and continued on. I never lost any of
my registrations or trading privileges, and the matter has been
put to bed. By everyone except some stupid website guy who wants
to keep reminding people what a terrible person I am.
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4. Russell quit
trading two years ago, saying the system didn’t work
any longer because things had changed
The Pacific Turtle Fund (my major trading Fund) was closed
down by agreement by the directors. The reason behind that was
as follows:
1. The Fund had high administration fees
2. Government Tax policies changed so that investors in Cayman
Island Funds lost their anonymity
3. The largest investor in the Fund accounted for over
80% of the investments.
4. That investor decided they needed the money back
5. To maintain a smaller Funds Under management size on the
fee structure with not much
chance of new funds would have meant a drag on the returns
of the existing Investors
6. Richard Dennis had closed down his fund (more on this later)
7. Because of point 7 I did think that something had gonbe
wrong, and I did say that, and I did quit.
And I was dead wrong. Hey, first of all, everybody is entitled
to an opinion, no matter how silly it may be, and second of
all, everybody is human, and makes mistakes. I said what I thought
at the time, wound up making a big mistake, and I have seen
the light and since changed my mind. I was influenced by the
opinions of others, including that of my original teacher, during
a time when trend following was going through a long and extended
drawdown period. I was tired, and burned out, and lost my tenacity.
I should have known better, but I guess I didn’t realize
it at the time.
A year later, I saw how wrong I had been, and in fact, wrote
a very lengthy report (free to any of you or the asking) in
the beginning of 2003 explaining all of this. I have always
had a reputation of being very outspoken about things.
Not everyone likes me for this, but I always say what’s
on my mind, and don’t pull any punches. I said what
I believed at the time. And if/when I’m wrong, which
sometimes does happen, even to me, I admit it, and correct
myself.
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5. Richard Dennis blew up two trading funds
Well, I’m not sure that “blew up’ is exactly
correct, but it is true that on two separate occasions, public
funds managed by Richard Dennis suffered large losses and
had to be closed down. As far as I know, one of these cases
was completely Dennis’ fault, and the other was really
nobody’s fault, but let’s look at each one and
put them in perspective.
In the first case, about 15 years ago, a public fund run
by Drexel Burnham had to be shut down because the account
lost 50% of its net asset value and reached its legal termination
point. I have no idea how this fund, managed by Richard Dennis,
managed to lose all that money, because in that same year,
both the Turtle computer model as well as all the other Turtles
that were now working as CTA’s, had a large winning
year. Can somebody say “not following the rules”.
Dennis later admitted that he implemented various new and
different trading strategies, in part because he was afraid
that if he and all the other Turtles kept chasing the same
signals, the system would not work any longer. Well, everyone,
both human and computer model, who stuck with the original
program made money, and Dennis, who did something ‘different’
lost money. I guess if you have a proven system, and don’t
follow your own rules, even if you happen to be the inventor
of the system, you still do not get any special dispensation
from the markets.
Now, as for the second instance which happened just a couple
of years ago, the markets had been going through a long and
extended choppy period, and all trend followers were suffering.
Dennis wound up suffering close to a 40% drawdown during
the first nine months of 2001, and Kenmar Partners (the Fund
operators) said he had hit his liquidation point so they shut
it down. What people forget is that nobody makes money all
the time, and even good traders always give some back. In
the previous couple of years that Dennis had been trading
the Kenmar Fund, he had very impressive returns, such that
all the original investors in the fund still wound up with
a profit, even after the losses that were incurred. Imagine
if you started with 100, doubled it to 200, doubled it again
to 400, then again to 800, then took a 40% loss bringing you
back down to ‘only’ 500. You are still way, way
ahead of the game, but everybody just focuses on the (recent)
losses.
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6. Other people are willing to sell the Turtle
system for less money (or for more money)
I hate to talk badly about other people, even when they talk
badly about me. I have always held myself above that, and
will continue to do so. There are a couple of other guys out
there that are marketing “turtle” trading courses,
and saying bad things about me to boost themselves up. I really
have better things to do than get into a pissing contest with
these clowns.
There is one guy who sells a course for about $1,000, which
is a lot cheaper than mine. The only problem is, he is not
a Turtle, never was a Turtle, and in fact, I have never been
able to find out exactly who or what he is. Except that he
has a nice slick website, and apparently a lot of experience
with marketing various products over the internet. He has
somehow learned some of the Turtle material, but by no means
has all of it. And what is even worse, I have heard from many
of his disgruntled customers that he is impossible to get
hold of, and his follow up support is non-existent.
On the other end of the scale, there is another fellow, who
is indeed a legitimate Turtle, and in fact one of the better
ones as far as I can remember. This guy wants to give away
the Turtle rules for free on his website, because he believes
(as Richard Dennis has said in the past), that nobody is going
to have the discipline to follow them anyway. And of course,
he is right. But then his company wants to offer you a week
long private trading course for the paltry fee of $25,000.
Well, if you have that kind of money, please go and be my
guest. But I just can’t imagine what he can teach you
that I can’t that would possibly be worth that kind
of money, or anything even remotely close.
The bottom line is that the material is only half the story,
the more important half is the way it is taught. I know guys
who are brilliant traders, but they couldn’t explain
to you the first thing they do, because either they can’t
quantify it, or they just don’t have the right communication
skills. The value I give is not in just giving the rules,
but in explaining how they work, how and when and where to
use them, and to support them all with historical testing
to show they really do work.
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7. The Turtle system has very bad draw downs
Yep, it’s true. But the draw downs come after a big
run up in equity ie after it has done really really well.
Show me any good system that doesn’t go through bad
periods. It just doesn’t exist. It is a fundamental
law of economics, if you want to get a reward, you have to
take some risk. If you are not willing to take the risk, you
are don’t deserve to make anything. You can always
go put your money in treasury bills, at 2% interest. What
is important is that the risk and reward be commensurate with
each other. And for the given amount of risk, there is no
greater profit potential than the Turtle system.
Of course, if you are not comfortable with the risk, you
can also reduce your leverage and trading size down to where
you can sleep at night. The great power of the Turtle system
is the flexibility of the money management rules, which are
designed to let you choose your own level of risk and reward,
and to keep you in the game during the rough periods. Hell,
anybody with a computer these days can figure out halfway
decent buy and sell signals, it’s money management that
is most crucial.
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8. The Turtle system just doesn’t
work any more
Of all the objections and criticisms I hear, this has to
be the silliest. Yes, of course, there are periods when the
method just doesn’t work. False breakouts produce losses,
and it can go this way for months at a time. But this is a
long term system, one that has been consistently profitable
(and I mean a 100% per year level of profits) for twenty years,
and will continue to do so.
As I’ve said before, I wrote a lengthy paper on just
how and why this will must be true, which I will be happy
to send out free of charge to anybody that wants a copy.
But hey, don’t take my word for it. Thank god for machines
like computers and programs like Tradestation. There is no
computer program in the world that can predict the future,
so I can’t guarantee that the Turtle method will continue
to be profitable forever. But I can show you that it
has been very consistently profitable year after year after
year since Dennis and Eckhardt taught it to us back in 1983.
And there are no tricks here, no curve fitting, no optimizing.
The exact same rules, applied the exact same way, to all the
different markets, year after year. I couldn’t make
this stuff up if I wanted to. You can read the code and print
out the results for yourself.
This stuff works, plain and simple. If you learn the rules,
and have the patience and discipline to follow them, you should
be fine. If somebody, be it Russell Sands or Richard Dennis,
or anybody else, messes up and doesn’t follow their own
rules, well can say whatever you like about the personal disciplinary
shortcomings of that person as a trader, but that still in no
way will invalidate either the legitimacy or the profitability
of the system itself.
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