From going from 400 to 200 million, what are the reasons for the guru's 80% huge loss?

Combining red and green.

The turtles had Dennis as their spiritual mentor, giving them the confidence to trade. "But who will be Dennis's spiritual mentor? Who will tell Dennis 'it's okay to lose money'?"

01 Dennis's Trading History

Almost everyone knows about the brilliant performance of Richard Dennis, but few know about the darker side, and even fewer reflect on the reasons for his ultimate failure.

Dennis: The famous founder of the Turtle Trader, turning $400 into $200 million, dominating Wall Street. However, he suffered major losses in 1978 and 1987, losing 50%, with his personal losses exceeding 80%. After 1988, the management fund announced its closure, he did not rise again, and announced his retirement from speculation in the market.

Throughout his years of speculation, Dennis made a name for himself by often buying at the lowest point and then shorting at the peak. In reality, Dennis believed that such trades did not yield much profit. He accumulated huge profits not by accurately predicting market tops or bottoms. He estimated that 95% of his profits came from 5% of his trades. He firmly believed in letting profits run.

02 Dennis's Two Waterloo

In 1978, Dennis's trading performance was very poor, with a drawdown of over 40%. After going through an adjustment phase, he summarized two reasons:

1. Because most markets were in a sideways trend that year, there were numerous false breakouts, which failed to provide reliable trends for him to show his skills;

2. He moved away from the trading pit and instead traded remotely from an office building, losing the advantage of obtaining various information and first-hand data. Trading remotely off the floor allowed him to trade multiple commodities, foreign exchange, and interest rate futures simultaneously, which was a wise choice in the long run.

In response to changes in the environment and conditions, he gradually adjusted his trading strategy to focus more on medium to long-term trades. During the stock market crash in 1987, Dennis suffered heavy losses, with his funds losing nearly half, and his personal account also experiencing the same dismal performance, with losses exceeding 80%. His focus was mainly on shorting bonds. After the stock market crash, interest rates were lowered, causing bonds to surge. Despite risk control measures, it was difficult to stop the losses at that time, resulting in heavy losses.

Looking back at his two major mistakes (one before he disbanded the Turtle training class and one after he returned), his profits plummeted by 50%.

The fund he managed was forced to dissolve in April 1988, and his own assets shrank significantly from a peak of $200 million to just over $10 million. He decisively announced his departure from the speculative market, retired from speculation, and focused on politics.

03 Reasons for Dennis's Failure Why did Dennis lose 50% before dissolving the fund?

If it was due to a huge market change and significant drawdown in returns, it doesn't make sense, because during the same period, the Turtles made 40 million RMB using his rules. Why was his trading performance not as good as the Turtles he personally trained?

The Turtle program ended in 1987, and afterwards, the Turtles each embarked on their own trading or non-trading paths. After searching for a long time, some Turtles who continued trading were found. Their trading methods were almost all systematic, long-term trend-following strategies.

The Turtles had Dennis as a spiritual mentor. When they experienced losses, Dennis would come out to support them. During a period of prolonged market volatility, the Turtles' accounts suffered severe losses. At this time, Dennis intervened, invited them to a celebration in Las Vegas, injected more funds, and told them "losing money is okay, it's the cost of winning" and "often after a period of choppy consolidation in the market, there will be a crazy big market move." As he predicted, after overcoming the difficult period, the Turtles' profits soared, with an average return rate of over 100%.

The Turtles had Dennis as their spiritual mentor, giving them confidence in their trading. "But who will be Dennis's spiritual mentor? Who will tell Dennis 'losing money is okay'?"

Dennis's later failures may have stemmed from his rebellion against his own set rules. Masterful individuals often enjoy innovating, and in the process of innovation, they are bound to encounter unexpected failures. At least during the same period, his "Turtles" did not fare too badly. Just like Livermore, who later became overconfident, heavily invested, and ended up defeated without a good ending, probably due to deep-rooted human nature.

Dennis was known for his "discretionary" nature, meaning he often acted on impulse and intuition, not strictly following the rules of the system. He was well aware of this himself and once confessed to Jack Schwager in "Market Wizards," "Essentially, I am a contrarian." For him personally, he was his own master, without a higher supervisory mechanism, he could only rely on self-discipline, hence the frequent occurrence of imbalanced trading performance.

When a person needs to be accountable for themselves, and no one can effectively supervise, control, or balance them, what methods can force them to comply with regulations and rules?