Richard Dennis. You may have read about him.
His story is truly a stuff for trading legends. This guy was around 23 years old and he was reported to have borrowed $1,600 and turned it into $200 million in about 10 years trading commodities.
By the time he was 26 years old, he was already a millionaire trader.
Here’s an interesting fact: He only traded $400 of the $1,600.
How? Well, you will find out below.
Where did he get the money to trade? Borrowed from family.
There are only few few traders that can take a small amount o money an turn it into millions and this trader was one of them.
That is an impressive feat.
After his success, he got into managing funds and suffered significant losses in the stock market crash of 1987.
Richard Dennis Net Worth
What is Richard Dennis’s net worth?
Unfortunately, I cannot find anything online on Richard Dennis’s Net Worth but my good guess is that his net worth would be somewhere up in the tens of millions at least.
So Who Is Richard Dennis?
That guy below, who looks like a nutty old professor, is Richard Dennis.
I don’t know what year this photo was taken but that fact is, he was a bit younger back then.
Richard Dennis was born in Chicago in January 1949.
He was once known as the “Prince of the Pit”. If you don’t know what that means then its this: he was making more money than those pit traders at that time.
Here’s how Richard Dennis got started in trading:
- Dennis became an order runner on the Chicago Mercantile Exchange at 17 years of age.
- a few years later he started trading his own account at MidAmerica Commodity Exchange just trading “mini” contract. As he was “underage” ( he needed to be 21 years old) to be trading, he worked as his own runner and hired his Father who traded for him in the pit.
- He ended up in University and got a bachelor Degree in Philosophy and got a scholarship as a graduate to continue studying further but he just couldn’t get trading out of his mind. So he quit that scholarship
- Borrowed $1,600 from his family and used $1,200 to pay for his seat and then started trading with only $400 trading capital.
- In 1970, he increased that $400 to $3,000.
- In 1973, his trading capital was $100,000
- In 1974, he made $500,000 in profits just trading soybeans and at the end of that year, he was a millionaire and he was just shy of his 26th Birthday.
Richard Dennis Trading Strategy
These are not the exact buy and sell rules of Richard Dennis strategy, I’m pretty sure there are books or websites out there that have details of his exact trading strategy but his overall methodology of how he trades are listed below:
- Dennis used a trend following strategy: buying when prices increased above their recent range and selling when they fell below their recent range.
- in 1970’s, it was an period of repeated crop failures and Richard Dennis knowing this, bought successively new weekly and monthly highs in trending market.
- Dennis held onto his trades for longer periods of time, ridding out short term fluctuations.
- He is known to pyramid his trading positions.
The Turtle Experiment
On one occasion, Dennis and his trader Friend William Eckhardt were debating about what it took to be successful in trading.
Richard Dennis believed that successful trading can be taught to anyone. William did not think so. William believed that Dennis had a special gift that allowed him to profit from trading.
To settle that argument, Dennis recruited and trained 21 men and 2 women in two groups.
The first group was recruited in 1983 and the second group was in 1984.
He called this group the “Turtles”.
Why the name turtles? Dennis gave the name Turtles after recalling the turtle farms he had visited in Singapore and he decided that he could grow traders quickly and efficiently as farm grown turtles.
Dennis took 2 weeks to train his trading recruits and gave each of them a live trading account to trade.
Long story short: when the Turtle Experiment ended 5 years later, his “turtles” were reported to have made Dennis an aggregate profit of $175 million.
Imagine if he had another continued to train and funded a lot more “turtles”? Could he have made a lot more? Possibly.
The Storm Hits
We all like fairly tail endings, don’t we?
We all like the star of the Movie, the hero, not end up dead like Tom Hanks in Saving Private Ryan.
Well, this was not really the case of Richard Dennis.
That storm was headed for him.
Richard Dennis at this point was having an incredible success prior to the 1987 stock market crash.
Maybe due to his success, other people wanted him to trade their money as well. I don’t know but for whatever reason(s), it was reported that Dennis managed pools of capital from from other investors.
Then in the stock market crash of 1987, he lost $10 million.
To make things worse, he lost again another $40 million in 1988.
So from 1987 to 1988, he was reported to have lost a total of $50 million.
He tried again managing funds for some time in the later 1990’s but he also suffered losses and closed down the operation.
He wasn’t the “Prince of the Pit” anymore.
I don’t know what he does these days but active trading is probably not one of activities.
What can you make from this story?
My guess is that, I think Richard Dennis tried to recover the $10 million dollar loss from the the 87 stock market crash and most likely traded aggressively with high risk to recover but actually lost another $40 million in doing so.
Trading loses have a really negative impact on traders if those losses are substantial.
Because what tends to happen is this voice screaming inside you saying ” You need to recover the money you lost!!!”
And than can lead to some serious money management mistakes like high risk trading and not following your trading system’s rules etc.
It can be also pretty hard on you as a trader when you know you’ve had great success in the past and even trying to replicate that success can be frustrating and can be a recipe for disaster when your trading performance at the moment is not like it used to be.
Richard Dennis Quotes
Ok, here are some quotes by Richard Dennis.
On Trading Consistency And Discipline:
I always say that you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.
On Market Behavior:
Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is testimony to the fact that the majority is wrong a lot of the time. The vast majority is wrong even more of the time. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
On When Trading Is Not Going Right:
When things aren’t going right, don’t push, don’t press.
On Trading Losses:
I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.
On Sticking To The Trading Plan And Trade:
When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists.
On Trend Trading:
The market being in a trend is the main thing that eventually gets us in a trade. That is a pretty simple idea. Being consistent and making sure you do that all the time is probably more important than the particular characteristics you use to define the trend. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.
On Emotions In Trading:
Trading decisions should be made as unemotionally as possible.
On Trend Following System & Trend Trading:
A good trend following system will keep you in the market until there is evidence that the trend has changed.
On Unexpected Nature Of The Market:
There is another point that I think is as important: You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.
On Cutting Your Trading Losses:
You should always have a worst case point. The only choice should be to get out quicker.
On Trading Small and Learning From Mistakes:
Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes.
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