System 1 vs System 2 is basically “fast turtle vs patient turtle.” Both use the same bones: Donchian breakouts and volatility-based risk. The difference is how often they fire and how much noise you’re willing to sit through.
If you don’t pick a version on purpose, you’ll pick one accidentally based on your mood. And mood-based system selection is how traders become comedians without realizing it.
- System 1 = 20/10 breakouts: faster entries, more trades, more whipsaws. System 2 = 55/20: slower entries, fewer trades, more waiting.
- Both still need ATR-based sizing and discipline; the rules don’t change, only the pace and the pain.
- Pick the discomfort you can live with: many small losses (S1) vs. long stretches of nothing (S2).
- Write rules, review on a schedule, and track rule-breaking—system choice matters less than sticking to it.
The quick comparison
- System 1: more signals, more stop-outs, more action.
- System 2: fewer signals, fewer stop-outs, more waiting.
- Both: still need sizing and discipline to survive.
What actually changes in the rules
The indicator is still Donchian channels. The common setup is: System 1 enters on a 20-day breakout and exits on a 10-day reversal. System 2 enters on a 55-day breakout and exits on a 20-day reversal.
Risk stays the same idea: size by volatility and protect the downside. If you skipped that, you’re missing the most important part. Read ATR sizing and come back.
The real question: which pain do you prefer?
System 1 pain: lots of little losses and the temptation to “tweak” the rules. System 2 pain: long stretches of nothing and the temptation to invent trades because you’re bored.
Most people don’t quit because the system “failed.” They quit because the system did what it always does: it looked dumb for a while before it looked smart. Your job is to pick the kind of dumb you can tolerate.
A simple way to choose (no personality quiz needed)
- If you hate missing moves and you’re okay with more trades → start with System 1.
- If you hate noise and prefer fewer decisions → start with System 2.
- If you’re unsure → run System 2 for 8 weeks on paper. If boredom kills it, you learned something valuable.
Drawdowns: what “normal” looks like
Trend following drawdowns aren’t a bug. They’re the admission price. System 1 can look like a string of papercuts. System 2 can look like your strategy forgot your name. In both cases, position sizing is what keeps those phases survivable.
If you want the “why does this work at all” explanation, read Why trend following works. It’s the confidence booster you read when your strategy is acting weird.
How to stick with your choice
- Write your rules down in one page. If it needs 12 pages, you built a bureaucracy, not a system.
- Pick a review schedule (weekly). Not “whenever you’re stressed.”
- Track rule-breaking. Rule-breaking is the real performance killer.
Add a toggle on the Dashboard: “System 1 (20/10)” vs “System 2 (55/20)”. Then each signal can show which system is currently active.
External references
A quick, realistic walkthrough (the kind your brain actually needs)
Let’s do a simple play-by-play, because most “strategy explanations” are missing the only part that matters: what you do on a normal Tuesday. Picture this: you scan your list once a day. One market is breaking above its recent highs. Your job is not to guess the top or get poetic. Your job is to follow the steps you already decided on a calm day. If you want the full “start here” path, the hub is Articles.
- Check the level (the breakout point) and confirm it’s a real “new high” for your chosen window.
- Calculate your risk using ATR. If volatility is huge, your position will be smaller. That’s not a bug.
- Place the entry and the stop. Put the stop in the system, not in your imagination.
- After entry, stop watching every tick. If you must stare at something, stare at your rules.
- Exit by rule: either a reversal level hits, or your stop hits. Your mood is not on the list.
Sometimes you’ll get stopped out quickly. That’s normal. The system is built around the idea that a few big trends pay for a bunch of small “nope” trades.
Risk rules that keep you in the game
Here’s the unglamorous truth: most people don’t “lose to the market.” They lose to their own sizing. They take a normal strategy and turn it into a stress test by risking too much when they feel confident and too little when they feel scared. Turtle-style risk rules try to remove that swingy behavior.
- Pick a fixed risk per trade (a small percent of your account). Write it down.
- Use ATR for stop distance so you’re not placing stops inside normal noise.
- Size from risk: wider stop → smaller position; tighter stop → larger position.
- Cap your total exposure so one theme (or one sector) can’t dominate your portfolio.
If this feels like “too much math,” good news: it’s simple math. And it’s worth it. Start with ATR sizing.
The boredom problem (and how to stop sabotaging yourself)
A lot of traders don’t have a strategy problem — they have a boredom problem. Trend following is often quiet. That silence tricks you into “improving” the system with extra trades. That’s how people turn a good strategy into a messy hobby.
- Run scans on a schedule (daily or weekly). Outside that time, you’re done.
- Use alerts instead of constant chart-watching.
- Journal rule-breaking as a separate “expense.” It’s usually larger than commissions.
- If you need action, do something else: exercise, build tools, read. Not another trade.
A simple checklist you can follow without thinking
- Scan your universe for breakouts (20D/55D levels).
- Confirm liquidity/cost constraints for the instrument you trade.
- Compute ATR and position size from your risk rule.
- Place entry + stop. If you can’t place a stop, you can’t place the trade.
- Log it. Future-you is your compliance officer.
- Review every trade: did you follow rules, yes/no?
- Update the watchlist/universe only on the scheduled day.
- Check concentration: are you accidentally loaded up on one theme?
- Write one improvement for process (not “I wish price went up more”).
Quick FAQ (because your brain will ask these anyway)
- Do I need a ton of indicators? Nope. Price levels + risk rules carry the system. Extra indicators mostly add extra ways to second-guess yourself.
- Is a low win rate “bad”? Not for trend following. Many versions win less than half the time and still do fine because the winners can be much larger than the losers.
- Do I need to watch charts all day? Not if you trade daily rules. You can run a boring schedule and let the rules do the heavy lifting. The Dashboard is literally built for quick scanning.
- What should I read next? Start with Turtle Trading Explained → Donchian Channels → ATR for Turtle Trading → System 1 vs System 2. Or just scroll to the Further reading section below.
Share-friendly summary (steal this for socials)
Turtle Trading is rules-based trend following: buy breakouts, size by volatility (ATR), and exit by rules. It’s boring on purpose — and that’s the point. If you want the clean entry/exit levels, read Donchian channels.
Common mistakes (and the exact fix for each)
Most “strategy failures” are just process failures in a trench coat. Here are the usual suspects, plus what to do instead.
- Mistake: Moving stops because you “feel” it’s about to bounce. Fix: Decide stops before entry and treat them like a contract you signed with your calmer self.
- Mistake: Taking every signal in the same sector/theme. Fix: cap exposure and diversify; correlation loves to ambush people.
- Mistake: Changing parameters after a losing streak. Fix: lock rules for a fixed evaluation window (e.g. 8–12 weeks).
- Mistake: Ignoring costs. Fix: assume worse fills on breakouts and test with conservative assumptions.
- Mistake: Overtrading because you’re bored. Fix: schedule scans; outside scan time, do literally anything else.
A simple position sizing example (numbers make this click)
Say your account is $10,000 and you decide to risk 1% per trade. That’s $100. You measure ATR, set a stop distance (often around 2×ATR), and then you size the position so a stop-out loses about $100. That’s how you make each trade equally survivable, even when markets have different volatility.
Example: if your stop distance is $4, you can take roughly 25 shares ($100 / $4). If the stop distance is $10, you take 10 shares. You didn’t “get scared.” The market just got wilder, so you got smaller. That’s the whole philosophy in one sentence.
Want the deep version? ATR for Turtle Trading is your friend.
Media ideas (easy wins)
- A 2–6 minute video: “Breakouts in one chart” + a quick tour of the Dashboard.
- A simple infographic: the “Turtle loop” (Scan → Size → Enter → Stop → Exit → Repeat).
- A shareable checklist graphic (daily + weekly). People love screenshots more than they admit.
Add a small “Share this” CTA after the first big section. People share when you saved them time or made them laugh — ideally both.
A tiny story about sticking to rules (because this is where most people lose)
Picture a normal losing streak: three trades in a row that stop out quickly. Nothing catastrophic, just annoying. Your brain starts negotiating: “Maybe the settings are wrong.” “Maybe I should wait for confirmation.” “Maybe I should just take smaller trades until it ‘feels’ better.”
That negotiation is the danger zone. Not because you’re dumb — because you’re human. Trend following looks worst right before it looks fine again, and the market has a talent for timing your doubts perfectly. The disciplined move is boring: keep the rules, keep the risk consistent, and review on your scheduled day.
If you want a practical way to lock this in, do two things: (1) write your rules in one page, and (2) track a “rule score” each week (0–100%). Improve the score before you change the strategy.