The Turtle trading rules are probably the most famous trend-following system ever written down: buy a 20-day or 55-day high, sell a 20-day or 55-day low, and let the trend do the work. We tested a stripped-down version of the Donchian channel breakout on Nasdaq-100 futures (NQ) from June 2010 to April 2026, long and short. The long side worked. The short side was a disaster.
Where the Turtle trading rules come from
In 1983, commodities trader Richard Dennis and his partner William Eckhardt ran a famous experiment. Dennis believed trading could be taught; Eckhardt thought it was mostly talent. Dennis recruited a group of mostly inexperienced people through newspaper ads, trained them for about two weeks and gave them money to trade. He called them "Turtles." According to widely repeated accounts, the group went on to make large profits over the next several years.
The rules were kept private for years and later published, most completely by original Turtle Curtis Faith in his book Way of the Turtle. The core entries were Donchian channel breakouts, named after Richard Donchian, who popularized trading channel highs and lows: System 1 used a 20-day breakout with a 10-day exit, and System 2 used a 55-day breakout with a 20-day exit. Stops were set at 2N, where N is the 20-day average true range (ATR).
The exact rules we tested
- Market: NQ continuous front-month futures, daily bars, June 7, 2010 to April 16, 2026.
- 20-day breakout (System 1 style): go long at the close when it's above the highest high of the prior 20 days. Exit at the close when it's below the lowest low of the prior 10 days.
- 55-day breakout (System 2 style): same, with a 55-day entry and a 20-day exit.
- Shorts: mirror image. Short a close below the prior 20- or 55-day low; cover on a close above the prior 10- or 20-day high.
- Stop: 2N from the entry price, with N = 20-day ATR at entry (Wilder-style smoothing). The stop is fixed at entry and fills exactly at the stop level if the day's range touches it.
- Position: one contract, one trade at a time per test. Long and short were tested separately.
- Costs: 1.0 NQ point per round trip. Results are NQ points per 1 contract; MNQ = $2/point, NQ = $20/point.
What we left out: the original Turtles pyramided up to four units, sized every position by N, traded a diversified basket of futures, and System 1 skipped a breakout if the previous one had been a winner. None of that is modeled here. This is the entry, exit and stop skeleton applied to one market.
Donchian channel breakout results on NQ
| Variant | Trades | Win rate | Avg pts | Total pts | Profit factor | Closed-trade DD (pts) | Pts 2010–19 | Pts 2020–26 | PF 2020–26 |
|---|---|---|---|---|---|---|---|---|---|
| 20-day breakout, long | 92 | 48.9% | 100.35 | 9,232.6 | 1.89 | -1,794.1 | 1,735.9 | 7,496.7 | 2.03 |
| 20-day breakout, short | 77 | 14.3% | -169.20 | -13,028.7 | 0.21 | -13,028.7 | -4,679.7 | -8,349.1 | 0.28 |
| 55-day breakout, long | 41 | 53.7% | 305.38 | 12,520.6 | 4.56 | -1,085.5 | 2,353.2 | 10,167.4 | 5.73 |
| 55-day breakout, short | 30 | 10.0% | -250.06 | -7,501.9 | 0.16 | -7,501.9 | -2,191.1 | -5,310.8 | 0.21 |
Buy and hold over the same span: 24,677.2 points, with a worst decline of 5,878.2 points.
Longs: the 55-day breakout was the standout
The 55-day breakout long made 12,520.6 points ($25,041 on one MNQ contract) from 41 trades, with a profit factor of 4.56. The average winner (728.88 points) was nearly four times the average loser (-184.98). That's exactly what trend following is supposed to look like: roughly half the trades lose small, and a few big trends pay for everything.
The 20-day breakout long also worked, but less well: 92 trades, profit factor 1.89, 9,232.6 points. Faster breakouts meant more false starts.
Neither beat buy and hold on total points. The 55-day version captured about half of buy and hold's gain while being in the market only part of the time, and its closed-trade drawdown was 1,085.5 points. Keep in mind that figure only counts closed trades. Trades held for weeks can give back a lot before the exit triggers.
Shorts: a disaster on Nasdaq
The 20-day short lost -13,028.7 points on 77 trades with a 14.3% win rate. The 55-day short won only 10.0% of 30 trades and lost -7,501.9 points. For both, the closed-trade drawdown equals the total loss: the equity curve went down and never came back. Nearly every year was negative.
The reason is structural. NQ rose roughly fourteenfold during the test. Downside breakouts in a rising index tend to be sharp, brief and quickly reversed, so short breakouts got stopped out or covered on the snapback. We look at this pattern across several systems in shorting Nasdaq futures with trend systems.
The robustness check: 2010–2019 vs 2020–2026
NQ climbed from about 1,800 to about 26,000, so point totals lean heavily on recent years. The 55-day long made 2,353.2 points in 2010–2019 and 10,167.4 in 2020–2026 (profit factor 5.73 in the later period). The 20-day long made 1,735.9 and 7,496.7. Both were positive in each decade, which is the good news. Shorts lost in both decades.
Sample size: the 55-day short had only 30 trades and the 55-day long 41. That's enough to see the direction clearly, but not enough to trust the exact profit factor. A PF of 4.56 on 41 trades could easily look very different over the next 16 years.
What this backtest does not model
- Pyramiding, N-based position sizing, the System 1 "skip after a winner" filter and multi-market diversification.
- Continuous-contract roll gaps, which aren't adjusted and can trigger or distort a few breakouts.
- Fills at the exact close and exact stop price. Real stops can gap through, especially overnight.
- Open-trade drawdown, margin and taxes.
This is a historical backtest. Past results don't guarantee future results, and nothing here is financial advice.
Key takeaways
- 55-day Donchian breakout longs on NQ: 41 trades, profit factor 4.56, 12,520.6 points (2010–2026, after costs).
- 20-day breakout longs also worked (PF 1.89) but with more false signals.
- Shorts lost heavily at both lengths: -13,028.7 and -7,501.9 points, with win rates of 14.3% and 10.0%.
- Longs were positive in both 2010–2019 and 2020–2026, but neither beat buy and hold on total points.
- Sample sizes are modest (30–92 trades), and pyramiding, N-sizing and diversification weren't modeled.
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FAQ
Do the Turtle trading rules still work?
On NQ from 2010 to 2026, the long side did: the 55-day breakout long had a profit factor of 4.56 over 41 trades after costs. The short side lost heavily at both 20 and 55 days. We tested a simplified version without pyramiding or position sizing.
Is the 20-day or 55-day breakout better?
On Nasdaq futures, 55-day longs were better: profit factor 4.56 vs 1.89 for 20-day longs, and 12,520.6 vs 9,232.6 points.
Why did shorting breakouts fail on Nasdaq futures?
NQ rose about fourteenfold during the test. Breakdowns in a rising index tended to reverse quickly, so short trades were stopped or covered at a loss. The 20-day short won only 14.3% of trades.
What is 2N in the Turtle rules?
N is the 20-day average true range. A 2N stop sits two ATRs from the entry price. In our test it was fixed at entry.
Loomi.Ai provides educational market research, not financial advice. Trading futures and options involves substantial risk of loss, and backtested results are historical and do not guarantee future returns.
Sources
- Loomi backtest: blog_strategy_tests.py + results JSON, Loomi research
- The Original Turtle Trading Rules, TurtleTrader.com
- Richard Dennis Turtle Trading Strategy & Rules Explained, TrendSpider