Donchian Channel and the Turtle Experiment: the Source Reports a 35% Win Rate and Flat Results After 1986

The construction is the simplest of the common indicators. The channel **"is formed by taking the highest high and the lowest low of the last n periods"**, so **Upper = HighestHigh(N)**, **Lower = LowestLow(N)** and **Middle = (Upper + Lower) / 2**. ★**There is no averaging and no standard deviation** — which means none of the divisor or smoothing ambiguities that affect Bollinger Bands or RSI arise here. It was **developed by Richard Donchian**.^[1]

The stated signal rule is symmetric. **"If a security trades above its highest n periods high, then a long is established. If it trades below its lowest n periods low, then a short is established."** The channel also doubles as a volatility picture: **"If a price is stable the Donchian channel will be relatively narrow. If the price fluctuates a lot the Donchian channel will be wider."** ★**Originally the periods were daily**, though the article notes modern platforms allow any interval.^[1]

The article does not stop at the definition. It states that **"extensive backtesting utilizing 360 years of exchange data and 4,887 test trades with the default setting of 20 indicates that the Donchian channel indicator was ineffective."** ★**The reported win rate is 35% of trades.**^[1]

The arithmetic that follows is worth reading carefully, because it is nearly positive and then is not. **Combined with a reward-to-risk ratio of 2.0:1, that win rate "yields an expected profit of 5 cents per dollar invested."** **"While this is positive, when combined with slippage, this indicator might be unprofitable."** ★**So the edge, as the source describes it, is small enough that execution costs can erase it** — not a conclusion this page reached, but the one the reference states. ★**This page did not verify the backtest or locate its underlying study.**^[1]

The best-known application of a channel-breakout rule came from a wager. **Richard Dennis "believed that successful trading could be taught"**, and **"to settle a debate on that point with William Eckhardt"** he **"recruited and trained 21 men and two women, in two groups, one from December 1983, and the other from December 1984."** The group became known as the **Turtles**.^[2]

The training was brief and the rule was a range breakout. Dennis trained them **"for only two weeks about a simple trend-following system, trading a range of commodities, currencies, and bond markets, buying when prices increased above their recent range, and selling when they fell below their recent range."** They were **"taught to cut position size during losing periods and to pyramid aggressively."** ★**Position sizing was part of the system, not an afterthought.** After a one-month trial capped at 12 contracts per market, successful participants managed **$250,000 to $2 million** of Dennis's own funds, and the experiment **"reportedly had earned an aggregate profit of $175 million"** when it ended five years later.^[2]

★**This is the part usually left out of the Turtle story.** The article notes the exact system **"has been published in at least two books and can be back-tested to check its performance in recent years"**, and reports the outcome plainly: ★**"The result of such back-test shows a drastic drop in performance after 1986, and even a flat performance from 1996 to 2009."** It adds that several Turtles nonetheless went on to run their own firms.^[2]

The article also characterises the era the original results came from. Describing the trending inflationary markets of the 1970s — repeated crop failures and the 1972 Soviet wheat purchases — it says this was a period in which ★**"anyone with a simple trend-following method and a dart board could make a million dollars."** ★**Read together, the source is pointing at the market regime rather than the rule.** ★**This page does not attempt to apportion the result between the two**, and notes that Dennis himself **"reportedly lost $10 million"** in the 1987 crash and settled investor complaints of **failing to follow his own rules** for over $2.5 million in 1990, **without admitting or denying wrongdoing.**^[2]

★**Both sources are Wikipedia articles on a single domain (en.wikipedia.org), so this page rests on one institution with no independent cross-check.** ★**There is no Wikipedia article titled "Turtle Trading" as of 2026-09-23** — the Turtle material here comes from the Richard Dennis biography. ★**The backtests cited (the 360-year Donchian test and the Turtle system test) were not located or read**; they are reported as the articles summarise them, with no access to their methods, instruments or cost assumptions.^[1][2]

★**Not established:** what "360 years of exchange data" covers (the phrase may aggregate many instruments over shorter spans), what slippage assumption would flip the 5-cent figure negative, which N values were tested beyond the default 20, and the exact entry and exit rules the Turtles used. **As of 2026-09-23.**^[1][2]