'Richard Dennis' is explained in detail and with examples in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Richard Dennis was a long time commodities trader who earned the nickname the “Prince of the Pit.” Born in 1949 in Chicago, Illinois, he borrowed $1,600 from family and turned it into $200 million within ten years. He became more legendary still when he embarked on a famous experiment to teach ordinary people with no trading backgrounds how to trade. The movie “Trading Places” was based on this real-life story.
Dennis started his notorious career in commodities as a floor trader order runner at the Chicago Mercantile Exchange when he was only 17 years old. In only a few more years, he started to trade his own account at the Mid America Commodity Exchange using mini contracts. At the age of 24, Richard Dennis earned $100,000 in profits in 1973. The next year, he capitalized on a runaway soybean market to capture $500,000 in profits. At the end of that year 1974, he had already become a millionaire while only 25 years old.
The style of Richard Dennis turned out to be about enormous home runs with many more small strikeouts. His secret lay in the belief that traders had to learn to take losses physiologically and psychologically. While other floor traders were scalping their trades for little gains multiple times in a trading day, Dennis would take a position on and keep it for longer time frames. He rode out short term price fluctuations to hold positions for the intermediate term. He would pyramid his positions frequently. By the last years of the 1970s, he became so successful that he purchased a full membership over at the gold standard Chicago Board of Trade exchange. Dennis decided to open up his own office over the exchange so that he could trade still more markets.
Earning $200 million in the markets from his initial stake of $1,600 did not prove to be enough to satisfy Richard Dennis. He felt strongly that successful trading was not a natural ability, but that it could be taught to anyone who was willing to learn it. A fellow trader and friend of his William Eckhardt debated him on this idea to the point that Dennis made a social experiment which is now legendary. He hired and trained 21 different men and two women. Dennis did this in two separate groups, forming one group in December of 1983 and the second in December of 1984.
The two groups received two weeks of personal hands on training from Richard Dennis. He showed them how to use an easy to understand and relatively basic trend following system so that they could trade a wide variety of commodities, bond markets, and currencies. He taught them to buy when the prices rose outside of their short to medium term ranges.
They would sell them as they dropped underneath their recent range. He instructed them on how to cut their positions amounts when they were losing and to add on to aggressively when they were winning. He never permitted them to expose more than 24% of their total capital at any given point. The system is well- known. It encounters losses when the market remains trapped in a range as they can even for months on end. When the market makes a major move, it earns huge profits.
Dennis then gave each of the so-called “Turtles,” his traders, real accounts to trade these systems he had taught them. The few of them who had traded successfully in his one month trial received accounts to manage from his personal money. These accounts ranged from $250,000 to $2 million. At the end of his experiment five years afterward, his Turtles had made total profits amounting to $175 million for him.
Two separate books have published the precise system he taught these Turtles. For some reason, the system failed to perform well over the years 1996 to 2009, according to back testing of the data. Despite this fact, several of his turtles launched careers as successful managers of commodity trading firms. They utilized techniques that were like (but not the same as) his Turtle System to accomplish this.
In later years of his career, Richard Dennis suffered severe setbacks. He managed large pools of capital for other firms and individuals in the various markets. He lost $10 million during the Black Monday crash in the stock markets and an overall amount of $50 million between 1987 and 1988. His company also had to settle in the amount of more than two and a half million dollars with a group of investors. They claimed he did not follow his own system rules faithfully when managing their money. During the mid to late 1990s, Dennis managed some other funds but chose to close them after his substantial losses during the summer of the year 2000.
Besides his trading endeavors and teaching, Richard Dennis has written numerous op-ed pieces for the Wall Street Journal, The New York Times, and the Chicago Tribune. He serves on the Cato Institute Board of Directors and the Reason Foundation Board of Trustees. Dennis has worked actively in the political causes of Libertarian and Democratic campaigns, especially campaigning against the prohibition on recreational drugs.