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The Turtle Trading Experiment: A Successful Market Legend
Reviewed by Gordon Scott
Fact checked by Vikki Velasquez
In 1983, legendary commodity traders Richard Dennis and William Eckhardt held the turtle experiment to prove that anyone could be taught to trade. Using his own money, Dennis taught novice traders his technique, and in five years, they reportedly made over $175 million combined.
Key Takeaways
- The Turtle Trading experiment was seen as a tremendous success.
- Market conditions are always changing, and some question whether this style of trading could survive in today’s markets.
- Turtle Trading is based on purchasing a stock or contract during a breakout and quickly selling on a retracement or price fall.
- The Turtle Trading system is one of the most famous trend-following strategies.
The Turtle Experiment
By the early 1980s, Dennis was widely recognized in the trading world as an overwhelming success. He had turned an initial stake of less than $5,000 into more than $100 million. He and his partner, Eckhardt, had frequent discussions about their success. Dennis believed anyone could be taught to trade the futures markets, while Eckhardt countered that Dennis had a special gift that allowed him to profit from trading.
The experiment was set up by Dennis to finally settle this debate. Dennis would find a group of people to teach his rules to, and then have them trade with real money. Dennis believed so strongly in his ideas that he would actually give the traders his own money to trade. The training would last for two weeks and could be repeated over and over. He called his students “turtles” after recalling turtle farms he had visited in Singapore and deciding that he could grow traders as quickly and efficiently as farm-grown turtles.
Finding the Turtles
To settle the bet, Dennis placed an ad in The Wall Street Journal, and thousands applied to learn trading at the feet of widely acknowledged masters in the world of commodity trading. Only 14 traders would make it through the first “Turtle” program. No one knows the exact criteria Dennis used, but the process included a series of true-or-false questions, a few of which you can find below:
- The big money in trading is made when one can get long at lows after a big downtrend.
- It is not helpful to watch every quote in the markets one trades.
- Others’ opinions of the market are good to follow.
- If one has $10,000 to risk, one ought to risk $2,500 on every trade.
- On initiation, one should know precisely where to liquidate if a loss occurs.
For the record, according to the Turtle method, 1 and 3 are false; 2, 4, and 5 are true.
The Rules
Turtles were taught very specifically how to implement a trend-following strategy. The idea is that the “trend is your friend,” so you should buy futures breaking out to the upside of trading ranges and sell short downside breakouts. In practice, this means, for example, buying new four-week highs as an entry signal. Figure 1 shows a typical turtle trading strategy.
Source: Genesis Trade Navigator
This trade was initiated on a new 40-day high. The exit signal was a close below the 20-day low. The exact parameters used by Dennis were kept secret for many years, and are now protected by various copyrights. In “The Complete TurtleTrader: The Legend, the Lessons, the Results” (2007), author Michael Covel offers some insights into the specific rules:
- Look at prices rather than relying on information from television or newspaper commentators to make your trading decisions.
- Have some flexibility in setting the parameters for your buy and sell signals. Test different parameters for different markets to find out what works best from your personal perspective.
- Plan your exit as you plan your entry. Know when you will take profits and when you will cut losses.
- Use the average true range to calculate volatility and use this to vary your position size. Take larger positions in less volatile markets and lessen your exposure to the most volatile markets.
- Never risk more than 2% of your account on a single trade.
- If you want to make big returns, you must get comfortable with large drawdowns.
Did It Work?
The two classes of turtles Dennis personally trained earned more than $175 million in only five years. Dennis had proved beyond a doubt that beginners can learn to trade successfully.
Even without Dennis’ help, individuals can apply the basic rules of turtle trading to their own trading. The general idea is to buy breakouts and close the trade when prices start consolidating or reversing. Short trades must be made according to the same principles under this system because a market experiences both uptrends and downtrends. While any time frame can be used for the entry signal, the exit signal needs to be significantly shorter in order to maximize profitable trades.
Despite its great successes, however, the downside to turtle trading is at least as great as the upside. Drawdowns should be expected with any trading system, but they tend to be especially deep with trend-following strategies. This is at least partly due to the fact that most breakouts tend to be false moves, resulting in a large number of losing trades. In the end, practitioners say to expect to be correct 40%-50% of the time and to be ready for large drawdowns.
What Is the Turtle Method of Trading?
Turtle trading involves following trends with established position sizes, risk management criteria, and entry and exit rules.
Is Turtle Trading Still Profitable?
It depends on market conditions and how disciplined you are.
Who Is the Most Successful Turtle Trader?
According to TurtleTrader.com, Jerry Parker was Dennis’ top turtle trader.
The Bottom Line
The story of how a group of non-traders learned to trade for big profits is one of the great stock market legends. It’s also a great lesson in how sticking to a specific set of proven criteria can help traders realize greater returns. In this case, however, the results are close to flipping a coin, so it’s up to you to decide if this strategy is for you.
Why Landlords Choose a Triple Net Lease
Reviewed by Samantha Silberstein
Lease Types
Net leases require tenants to pay expenses such as taxes or insurance in addition to a monthly rent payment. Rents are generally lower with net leases than traditional leases. The more costs a tenant assumes, the lower the base.
Three types of net leases include the single net lease (N), double net lease (NN), and triple net lease (NNN). Under the terms of a triple net lease, the tenant pays the real estate taxes, building insurance, and maintenance.
Key Takeaways
- A net lease is a real estate lease in which a tenant pays one or more additional expenses.
- In a single net lease, the tenant pays a lower base rent in addition to property taxes.
- Double net leases include property taxes and insurance premiums plus a base rent.
- A triple net lease (NNN) includes property taxes, insurance, and maintenance costs.
Single Net Lease (N)
Single net leases are often referred to as a net lease or an “N” lease. In addition to a rent payment, the tenant pays property taxes. All other expenses, such as insurance, maintenance, repairs, and utilities, are the landlord’s responsibility.
If the tenant fails to pay the taxes to the local municipality, the landlord is held accountable. Many landlords include property taxes in the rent payments so that payment passes through them to ensure taxes are paid on time and correctly.
Double Net Lease (NN)
Double net leases, called net-net leases or “NN” leases, are common in commercial real estate. The tenant pays property taxes and insurance premiums in addition to rent. The base rent is generally lower because of the additional expenses the tenant bears. All maintenance costs are the landlord’s responsibility.
In commercial developments such as shopping malls and office complexes, tenants may rent space with varying square footage. Landlords assign taxes and insurance costs to tenants proportionally based on the amount of space leased. As in single net leases, the landlord is ultimately responsible for the tax and insurance payments and may have the tenant pay these expenses to the landlord directly.
Triple Net Lease (NNN)
The triple net lease (NNN) passes the costs of structural maintenance and repairs to the tenant in addition to rent, property taxes, and insurance premiums. Since additional expenses are passed on to the tenant, the landlord commonly charges a lower rent.
When maintenance costs are higher than expected, tenants under a triple net lease frequently attempt to get out of their leases or obtain rent concessions. To avoid this, many landlords use a bondable net lease that cannot be terminated before its expiration date. The rent amount cannot be altered for any reason, including unexpected and significant increases in ancillary costs.
Important
Landlords may use a bondable net lease to avoid a tenant’s potential to end an expensive triple net lease (NNN).
Comparison of Lease Types
| Renter Responsibilities for Net Leases | ||||
|---|---|---|---|---|
| Type of Lease | Rent | Property Tax | Insurance | Maintenance |
| Gross Lease | X | |||
| Single Net Lease (N) | X | X | ||
| Double Net Lease (NN) | X | X | X | |
| Triple Net Lease (NNN) | X | X | X | X |
Explain Like I’m Five
In a traditional lease, a tenant makes rent payments to use a property, and the landlord pays for repairs and other expenses.
In commercial real estate, some landlords offer a lower rent in exchange for the tenant paying for some of these extra costs. In a triple net lease, the tenant is responsible for the maintenance, taxes, and insurance. This arrangement reduces the rent burden on the tenant and reduces the risk for the landlord.
What Is the Difference Between a Gross Lease and a Net Lease?
Tenants may consider signing a gross lease, which charges a flat rental rate. This amount covers the fee for the space, as well as any additional expenses that come with it. The landlord pays the property taxes, insurance premiums, and maintenance costs. They cover these costs by building them into the rent they charge their tenant.
What Is the Difference Between a Net Lease and Step-Up or Ground Lease?
Net leases can be compared to step-up leases or ground leases.
With a step-up lease, future price increases are established in the rental agreement. In long-term leases, step-up leases protect landlords from inflation or a rising market. Ground leases permit tenants to develop property during the lease period. After the lease ends, the land and all the improvements are turned over to the landlord.
What Are the Advantages of a Triple Net Lease for the Landlord?
Most triple net lease agreements are structured to offer long-term tenant occupancy, which is advantageous for landlords because it removes the risk and losses of a vacancy between tenants. A triple net lease can provide a consistent source of income for the investor, and unknown or catastrophic property expenses will be passed on to the tenant, helping to protect any risks in the investment.
Why Do National Companies Choose a Triple Net Lease?
Many large, multinational companies that want brand uniformity opt for triple net leases. Walgreens is one example of a company that frequently agrees to 25-year triple net lease agreements.
When a company opts for a triple net lease, they absolve the landlord from any financial or physical responsibility. They do maintenance, choose vendors, order signage, and pay operating expenses and capital expenditures. The company is considered an excellent tenant in triple net leases and a conservative investment for investors.
The Bottom Line
A net lease is a type of real estate lease used primarily for commercial rental properties in which a tenant pays one or more additional expenses. There are three basic types of net leases: single, double, and triple net leases.
With a triple net lease, the tenant promises to pay the greatest number of expenses, including real estate taxes, building insurance, and maintenance. These payments are in addition to the fees for rent and utilities.
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AI-Powered Court System Is Coming to Crypto With GenLayer
What if there were a crypto protocol that specialized in arbitrating on-chain disputes?
Imagine if, whenever prediction markets like Polymarket settled in a controversial manner, users had a formal way to appeal through a sort of neutral on-chain court system. Or if decentralized autonomous organizations (DAOs) could rely on an efficient, knowledgeable third party to help them make decisions. Or if insurance contracts could automatically execute payouts when specific real-world events occurred.
That’s essentially what Albert Castellana Lluís and his team are building with GenLayer, a crypto project that markets itself as a decision-making system, or trust infrastructure.
“We’re using a blockchain that has multiple AIs coordinate and reach agreement on subjective decisions, as if they were a judge,” Castellana, co-founder and CEO of YeagerAI told CoinDesk in an interview. “We’re basically building a global synthetic jurisdiction that has an embedded court system that doesn’t sleep, that’s super cheap, and that’s super fast.”
The demand for such an arbitration project may spike in the coming years with the development of AI agents — sophisticated programs powered by artificial intelligence that are capable of carrying out complex tasks in an autonomous manner.
When it comes to crypto markets, AI agents can be used in all kinds of ways: for trading memecoins, arbitraging bitcoin on exchanges, monitoring the security of DeFi protocols, or providing market insights through in-depth analysis, to cite only a few use-cases. AI agents will also be able to hire other AI agents in order to complete even more complex assignments.
Such agents may proliferate at an unexpected rate, Castellana said. In his view, most crypto market participants could be managing a handful of them by the end of 2025.
“These agents, they work super fast, they don’t sleep, they don’t go to jail. You don’t know where they are. Are they going to pass anti-money laundering rules? Are they going to have a bank account? Can they even use a Visa card?” Castellana said. “How can we enable fast transactions between them? And how can trust happen in a world like this?”
Thanks to its unique architecture, GenLayer could provide a solution by allowing entities — human or AI — to get a reliable, neutral opinion to weigh in on any decision in record time. “Anywhere where you normally would have a third party made of a bunch of humans… We replace them with a global network that provides a consensus between different AIs, a network that can make decisions in a way that is as correct and as unbiased as possible,” Castellana said.
Synthetic court system
GenLayer doesn’t seek to compete with other blockchains like Bitcoin, Ethereum or Solana — or even DeFi protocols such as Uniswap or Compound. Rather, the idea is for any existing crypto protocol to be able to connect to GenLayer and make use of its infrastructure.
GenLayer’s chain is powered by ZKsync, an Ethereum layer 2 solution. Its network counts 1,000 validators, each one connected to a large language model (LLM) such as OpenAI’s ChatGPT, Google’s Bert or Meta’s Llama.
Let’s say a market on Polymarket settles in a controversial manner. If Polymarket is connected to GenLayer, users of the prediction market have the ability to raise the issue (or, as Castellana put it, to create a “transaction”) with its synthetic court system.
As soon as the transaction comes in, GenLayer picks five validators at random to rule on it. These five validators query an LLM of their choice in order to find information on the topic at hand, and then vote on a solution. That produces a ruling.
But the Polymarket users, in our example, don’t necessarily need to be satisfied with the ruling: they can decide to appeal the decision. In which case, GenLayer picks another set of validators — except this time, their number jumps to 11. Just like before, the validators issue a ruling based on the information they gather from LLMs. That decision can also be appealed, which makes GenLayer pick 23 validators for another ruling, then 47 validators, then 95, and so on and so forth.
The idea is to rely on Condorcetʼs Jury Theorem, which according to GenLayer’s pitch deck states that “when each participant is more likely than not to make a correct decision, the probability of a correct majority outcome increases significantly as the group grows larger.” In other words, GenLayer finds wisdom in the crowd. The more validators are involved, the more likely they are to zero in on an accurate answer.
“What this means is that we can start small and very efficiently, but also we can escalate to a point where something very, very tricky, they can still get right,” Castellana said.
The average transaction takes roughly 100 seconds to process, Castellana said, and the court’s decision becomes final after 30 minutes — a timeframe that can be elongated if multiple appeals occur. But that means the protocol can reach a decision on major issues in a very short period of time, day or night, instead of going through arduous real-world litigation processes which may take months or even years.
Looking at incentives
GenLayer’s mission naturally raises a question: is it possible to game the system? For example, what if all of the validators select the same AI (say, ChatGPT) to solve a given proposal? Wouldn’t that mean that ChatGPT will have essentially issued the ruling?
Every time you query an LLM, you generate a new seed, Castellana said, so you obtain a different answer. On top of that, validators have the freedom of choosing which LLM to use based on the topic at hand. If it’s a relatively easy question, perhaps there’s no need to use an expensive LLM; on the other hand, if the question is particularly complex, the validator may opt for a higher-quality AI model.
Validators may even end up in a situation where they feel like they’ve seen a certain type of question so many times that they can pre-train a small model for a specific purpose. “We think that, over time, there’s just going to be endless new models,” Castellana said.
There’s a strong incentive for validators to be on the winning side of the decision-making process, because they’re financially rewarded for it — while the losing side ends up incurring costs associated with using computation, without collecting any rewards.
In other words, the question is not whether one’s validator is providing a correct answer, but whether it manages to side with the majority.
Since validators have no idea what other validators are voting, the goal is for them to use the necessary resources to provide accurate information with the expectation that other validators will converge on that information as well — because arriving at the same incorrect answer would probably require rigorous coordination.
And if that gambit doesn’t work out, the appeal system is ready to kick in.
“If I know that I’m reusing a good LLM, and I think that other people are using a bad LLMs and that’s why I lost, then I have quite a big incentive to appeal, because I know that with more people, there’s going to be an incentive for them to be using better LLMs as well” since other validators will want to earn the rewards from a successful appeal, Castellana said.
The system makes it hard for validators to collude, because they only have 100 seconds to reach a decision, and they don’t know whether they will be picked to settle specific questions. An entity would need to control between 33% and 50% of the network to be able to attack it, Castellana said.
Like Ethereum, GenLayer will be using a native token for its financial incentives. With a testnet already launched, the project should go live by the end of the year, according to Castellana. “There’s going to be a very big incentive for people to come and build things on top,” he said.