Donchian Turtle

What It Does

Donchian Turtle runs on a single contract at daily bars. On every session close it computes two Donchian channels over the prior bars: an entry channel of length entry_period and an exit channel of length exit_period. Both channels exclude the current bar so the breakout test is honest about which side of the range today’s close lands on.

• If flat and the side is long-only or both, a close above the entry-period high opens a long at the close.
• If flat and the side is short-only or both, a close below the entry-period low opens a short at the close.
• A long position exits when the close falls below the exit-period low.
• A short position exits when the close rises above the exit-period high.

The exit channel is shorter than the entry channel by design. That asymmetry is what gives the strategy its character: enter on a fresh range expansion, exit when price has only retraced part way back. Holding period is whatever the trend lets it be.

There are no stops, no profit targets, no trend filters, no ATR-based position sizing. Fixed contract count, channel exit only.

Why It Works (Sometimes)

Channel breakouts capture the simplest possible trend hypothesis: when price clears a range it has respected for weeks, the path of least resistance is in the direction of the break. The original Turtles ran a variant of this rule across diverse futures markets in the early 1980s and produced one of the most cited results in systematic trading.

The edge depends on a few sustained trends paying for a long tail of small losing breaks. Win rates are typically below 50 percent. Profit factor lives or dies by how cleanly winners run before the exit channel pulls the position. Equity index futures spend most of their time chopping in tight ranges, and the strategy can spend many months underwater between meaningful moves. Decades-long futures trend studies still hold up; sample windows shorter than that often look unflattering.

Presets

Five presets ship out of the box:

• Turtle System 1 (20/10): the original short-term setup. Two-sided, fires often, prone to whipsaw in range-bound regimes.
• Turtle System 2 (55/20): the original long-horizon setup. Fewer trades, longer holds, larger individual winners and losers.
• Long-Only System 1: same 20/10 channel as System 1 but skips short entries. Useful where the short side has historically been a drag.
• Donchian 50/20 Both: a middle ground between System 1 and System 2.
• Short-Only System 1: the bearish leg in isolation. Equity indices tend to punish this; included as a reality check, not as a recommendation.

Use the form to set your own entry and exit periods; the presets are starting points, not endpoints.

Best In

• Trending instruments with periodic large moves. Commodities, currencies, and equity indices during persistent regimes have historically rewarded channel breakouts.
• Long horizons. Sample windows of a decade or more give the strategy room for a couple of trends to carry the equity curve.
• Research baselines. The Turtle rule is one of the most documented systematic templates; it makes a clean control against newer trend ideas.

Where It Struggles

• Range-bound regimes. Both channels get pierced repeatedly with no follow-through; small losses stack while the strategy waits for a real expansion.
• Short windows. Five-year samples can show wildly different outcomes depending on whether the period happened to contain a sustained trend.
• Markets without persistent directional moves. The strategy has no regime filter and will keep taking every breakout whether it works or not.

Possible Uses

• A baseline for comparing other trend-following ideas. A new breakout filter should beat the bare Turtle rule before being considered an improvement.
• A diversifier alongside a mean-reversion book. Channel breakouts tend to lose when reversion strategies win and the reverse.
• A starting point for layered strategies. Donchian breakouts combined with a volatility filter, a regime filter, or proper ATR-based position sizing often produce more usable equity curves than the bare strategy does.

What It Does Not Do

• No stops, no profit targets, no time exit. The exit channel is the only exit. If price never pulls back through it, the position is held until the strategy is shut down.
• No ATR-based position sizing. The original Turtles risked a fixed fraction of equity per trade based on N (ATR). This v1 uses a fixed contract count instead. That is a deliberate simplification; layering proper sizing on top is left to a future iteration.
• No pyramid adds. The original system added units as the trade moved in its favour. This implementation takes one entry per signal.
• No re-entry while in position. Once a long is open, additional breakouts above the entry channel are ignored.