Richard Dennis Trading Strategy | Key Lessons

Classed as one of the most successful trend traders of all time, Richard Dennis established a recognized strategy to trade the financial markets and not give up in the attempt. For cryptocurrencies as for traditional futures markets, his lessons will work the same way.

The essence of his vision does not rely solely on an indicator, pattern, or market condition, but on the ability of traders to keep a logical behavior and a consistent execution. In this article, you will learn the key lessons that determined his success.

The Richard Dennis Way

Richard Dennis was an outstanding futures and stock trader on Wall Street, known as a pioneer of trend-following strategies and a believer that every person can learn to trade if has the willingness and discipline to follow rules and a system.

Richard Dennis turned four hundred dollars into one million in a relatively short period. How much did it take? According to history:

1. First, the $400 became $3000.
2. Between 1970 and 1973, his equity was already $100,000.
3. Around 1974, he made a profit of $500,000.
4. Ultimately, in 1975, he reached one million at the age of 26.

Dennis' trading way has left teachings of one of the most successful mindsets and methods to trade financial markets, especially during trending conditions.

Alongside his colleague William Eckhardt, Dennis also developed the famous Turtles Trading System, where individual participants from distinct industries were trained in most of his trading beliefs and practices, achieving tremendous success among all of them.

The Turtle System is an excellent strategy for every beginner who wants to start a trading journey and should begin by paper trading to train themself on managing position during trends, which is the most complex stage of any market.

Surviving The Market: Always Use Stop-Loss

Protecting trade positions was a crucial concern for Richard Dennis. He believed the appropriate rule is never to risk more than 2% per trade.

Also, he stated that taking profits was not a real worry for him as it was to stay in a trend as long as possible. Indeed, a phrase to resume that reasoning would be the following: "Traders should stay in a trend until there are signals that it has changed".

Richard Dennis' idea for risk management is based primarily on the fact that traders can't control markets but can control losses. In this sense, proper risk management settles the ground for a successful trading outlook.

Specifically, he called this the survival rule: "The only thing I teach is always to use a stop. That's the only rule I have. I call it the survival rule. Because if you don't use stops, you will eventually bust".

From this lesson, traders can unveil the significance of proper risk management by using stop-loss orders, preserving the capital during wrong trades, and awaiting to seize the right opportunities.

Even famous Mark Douglas affirmed in a popular interview that Richard Dennis' streak was 95% wrong but winning tremendous big profits with the remaining 5% of assertiveness.

If Mark Douglas is right, his affirmation confirms the outstanding effectiveness of a trend-following strategy, which takes us to the second lesson in this article.

Trend Following And Long-Term Mindset

If there was a trader who honored the aphorism "the trend is your friend" that was Richard Dennis. As part of his trading strategy, identifying and staying in a trend as long as possible was vital for him to succeed.

In this matter, Dennis' primary notion about trends is that large trends lead to great profits. From this idea, traders can intuit the long-term mindset established behind it.

As it is essential to keep a position during a trending market, it is critical to maintain a long-term approach. In addition to this, Richard Dennis, as an indicator trader, would recommend using momentum tools that may help identify the market direction and confirm entry points, monitoring the strength of the trend as it keeps its trajectory until its end.

Indicators such as the following will accomplish that task:

• Moving Averages.
• RSI.
• MACD.

As proof of the utility of indicators to follow trends, in the Turtle Trading System, the Donchian Channel is the tool that signals entry points under a short-term and long-term scheme.

Cut Losses And Let Profits Run

Following the idea of the survival rule for risk management alongside the trend-following approach and long-term mindset, there is a substantial issue to consider when executing trades.

For Richard Dennis, as for the majority of well-known seasonal traders, cutting losses quickly while letting profits flow is the definitive behavior for successful trading and growing capital.

In this matter, we can also point out the ability to scale a position by adding more as a fundamental part of gaining an edge over trending markets.

Dennis' teachings are to never average out a losing trade, as the market will most likely move against the traders' position first before going in their favor.

Avoid Emotions, Stick To A Plan, And Trade What You See

Ultimately, avoiding emotions while following a structured plan will guarantee the accomplishment of the other factors regarding execution, opportunities identification, and risk management.

Emotions can create biases during winning streaks, inducing traders to increase size randomly and disproportionately. At losing streaks, avoiding the pain of a quick loss can lead traders to even more significant losses.

This way, traders also maintain a clear mind state, which enables them to trade the setups and price action a plan establishes.

Conclusion

Since Richard Dennis demonstrated tremendous success throughout his trading career, he captivated the attention of other traders and enthusiasts who exposed his lessons in several books and studies.

Dennis' approach was applied and tested among different individuals through the Turtle Trading Program, leaving proof of the reliance on his beliefs and establishing clear distinctions between success and failure in trading: discipline and consistency, while keeping emotions out of the game and following a plan.

In Altrady, traders can start to apply all these lessons in a trading terminal streamlined for crypto markets while taking advantage of smart trading features for effective risk management and indicators to identify trends. Sign up for a free trial account today.