# Turtle channel breakout: a strategy to learn and test | DT Academy > Buy a new 20 or 55-day high, size by volatility, ride it to the opposite break. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Breakout # Turtle channel breakout The rules Richard Dennis and Bill Eckhardt taught their Turtle traders in 1983. You enter when price breaks the highest high (or lowest low) of a set number of days, size every position so one normal day's move is the same share of the account, cut a loser at a fixed volatility distance, and let a winner run until a shorter break the other way. There are no profit targets: a few large trends pay for many small losses. Intermediate Liquid futures in the original (bonds, currencies, indices, metals, energy, softs); the sources do not cover spot forex, CFDs or crypto Daily bars D1 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fturtle_breakout) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fturtle_breakout) Example 01 ### Turtle channel breakout on a chart XAUUSD · D1 20-day high break, ride, exit 20-day high: 2,368.33N, 20-day ATR: 7.03Stop, entry minus 2 N: 2,354.28Exit, 10-day low: 2,478.30Sample candles, not market data The entry was one tick above the 20-day high, the stop 2 N below it, and the trade stayed on until price made a 10-day low. No target was ever set. ### The rules Setup Work out N, the 20-day average true range, for each market Size one unit so that 1 N equals 1% of the account Entry System 1: enter one unit when price trades one tick beyond the 20-day high (long) or low (short), and skip it if the last 20-day breakout would have been a winner If you skipped a System 1 signal, take the 55-day breakout instead so you do not miss a big move Or System 2: enter one unit on every 55-day breakout, with no filter Stop 2 N from the entry, so no trade risks more than 2% of the account Target None: the system exits on its exit signal, not at a target Manage Add a unit every half N in your favour, up to 4 units, and raise the earlier stops by half N each time System 1 exits on a 10-day low (long) or high (short); System 2 on a 20-day low or high; all units exit together ### Common mistakes - Taking profits early. The rules call exits the hardest part. Leaving early cuts off the trends that pay for the losses. - Skipping signals. Picking which breakouts to take turns a system into guesses. - Sizing by feel. Without N-based sizing a quiet market and a wild one carry very different risk. - Too much in one theme. Several related markets (gold and silver, a few USD pairs) can be one big trade. The rules cap units across them. ### When it's off - Out when the 2 N stop is hit - Out when the opposite 10 or 20-day breakout prints ### Words to know Breakout Price moves through a support, resistance or range edge and a candle body closes beyond it. A wick beyond that closes back inside is a sweep, not a breakout. ATR stop A stop placed a multiple of the Average True Range away from the entry or a swing, so its distance follows how much the market is moving. ATR measures range, not direction. R multiple 1R is what you lose if the stop is hit, and results are measured as multiples of it: making twice your risk is +2R, a full stop is -1R. R needs the initial stop; without a recorded stop it is unknown, not zero. N The 20-day average true range: one normal day's move. Donchian channel The band between the highest high and lowest low of the last set number of days. Pyramiding Adding to a position as price moves in your favour. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - How do you work out N, and do you size every trade from it or use a fixed lot? - Do you log the System 1 breakouts you skipped, so you know whether the last one would have won? - What is your total open risk across related markets? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fturtle_breakout) ## From DT Academy - [Managing risk in the strategy](https://www.thedtterminal.com/academy/managing-risk-in-the-strategy) - [How to choose your risk](https://www.thedtterminal.com/academy/how-to-choose-your-risk) - [Backtesting your trades](https://www.thedtterminal.com/academy/backtesting-your-trades) ## What testing exists The Turtle rules come with stories of their results, not independent tests. Studies of breakout and trend rules in general are mixed, and none tests these exact rules. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [The Original Turtle Trading Rules (foreword by Curtis Faith), chapters 2 to 7 (opens in a new tab)](https://turtletradersystem.blogspot.com/2009/01/original-turtle-trading-rules-foreword.html), Turtle Trading blog - [Simple technical trading rules and the stochastic properties of stock returns (Journal of Finance, 1992) (opens in a new tab)](https://ideas.repec.org/a/bla/jfinan/v47y1992i5p1731-64.html), Brock, Lakonishok and LeBaron - [A century of evidence on trend-following investing (Journal of Portfolio Management, 2017) (opens in a new tab)](https://www.aqr.com/Insights/Research/Journal-Article/A-Century-of-Evidence-on-Trend-Following-Investing), Hurst, Ooi and Pedersen, AQR - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. [Risk disclosure](https://www.thedtterminal.com/risk-disclosure) --- Risk disclosure: Futures, forex and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. [Read the full risk disclosure](https://www.thedtterminal.com/legal/risk-disclosure). 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