In 1983, Richard Dennis selected a group of ordinary people – accountants, gamblers, a security guard – and taught them to trade. The experiment became one of the most famous in trading history: the Turtle Traders. Jerry Parker was one of them, and unlike most, he went on to build a multi-decade career managing institutional money with a system that still runs on the same principles he was taught at age 25.
Jerry founded Chesapeake Capital in 1988, grew it to over two billion dollars in assets under management, and has been a consistent voice for long-term, rules-based trend following ever since. He is blunt about what works, what does not, and why the investing industry consistently resists both.
This episode covers his time in the Turtle program, the lessons that have stayed with him across 30-plus years of live trading, how he manages correlation and drawdown, and why the hardest thing in trend following is not the strategy – it is the discipline to keep doing it when it is not working.
Watch the full episode below, then read on for the complete breakdown.
The Turtle Program: What Made It Work
Jerry passed the initial true-false test that all Turtle applicants were required to complete. He is honest about his qualifications at the time: “As just a small-time, young 25-year-old in Richmond, Virginia in an accounting job, I needed something other than my experience or good looks.” What impressed Richard Dennis in the interview was passion. Jerry wanted to be a trader and nothing was going to stop him.
What the program provided was exceptional: world-class mentors, an environment that rewarded doing the right thing regardless of short-term results, and a culture of trust. “If you’re losing money but you were doing the right thing, that’s fine. In fact, if you’re losing money, we may give you more money. But if you’re making money and not doing what you should be doing, you may get in a little trouble.”
That culture is the opposite of what most traders experience today, where a small drawdown generates immediate pressure to change something.
The Hardest Lesson: Taking Every Trade
In Jerry’s first week of trading, he took about five trades when he should have taken twenty. Richard Dennis called to check in. “He was really low key and the nicest person. He just said, yeah, that’s right, just do the trades.”
The lesson stuck. In trend following, missing a trade is a type-two error – far more costly than a type-one error of taking a trade that turns out to be wrong. Your stop loss manages the type-one error. Nothing manages the type-two error except discipline. “A small percentage of your trades make all of the money. Nothing will bail you out if you miss a big trend.”
The Core Principles That Have Not Changed
After more than three decades, Jerry has refined many parameters but kept the foundational framework intact:
- Diversification: Currencies, commodities, equities, and interest rates – long and short. He allocates 25 percent of his risk budget to each of the four major asset classes.
- Short trades: Not very profitable on average but essential for diversifying returns. “Sometimes they are profitable – now is a good example.”
- Longer term is better: Short-term trend following in its traditional sense has not proven profitable to Jerry. Longer-term approaches require exits that are far from the market – not close stops that prevent trades from developing.
- Trade small: Preserving capital through drawdowns is more important than maximising returns during good periods.
Managing Correlation and Drawdowns
Jerry’s approach to correlation is pragmatic: he assumes everything within an asset class is highly correlated and allocates at the class level, not the instrument level. But he also acknowledges that all four asset classes can become correlated simultaneously in extreme conditions.
His response: “When the correlations are increasing, reduce your vol, reduce your positions, trade smaller to preserve capital. Then without notice, correlations go back to being less and you readjust.”
On drawdowns specifically, he uses a simple draconian rule: if you are down 10 percent in circumstances that concern you, reduce all positions by 20 percent. “It works, it always works, and it’s the only thing that always works. It prevents you hitting another drawdown of 20 percent that would really make you uncomfortable.”
Why He Ignores Client Pressure
Running institutional money for decades taught Jerry a consistent lesson: client feedback is almost always harmful to strategy performance. Clients push back on holding losing positions, giving back profit, and staying short in bull markets. These are precisely the behaviours that trend following requires.
“Turtles came out of there with a chip on their shoulder realising that we were in charge of doing the system – and that all the outside influences would probably be negative,” he says. Maintaining that independence, despite pressure to explain and justify every position, is what allows the system to run as intended.
The Difference Between Being at Chesapeake vs. the Turtle Program
At the Turtle program, Jerry felt constrained by the group environment – hesitant to stray too far from what others were doing, suppressing his own ideas. At Chesapeake, that constraint lifted. He made changes, explored different parameters, and went down what he calls “bad paths” in search of improvements. His conclusion: nothing he has found in 30 years has beaten the basic turtle framework for money management. The entries have evolved. The exits have become longer-term. But the core philosophy – trade the trend, size appropriately, cut losses – remains intact.
Related episodes
- Entries, Exits and Trend Following with Larry Tentarelli
- Hedge Fund Manager Andreas Clenow on Trend Following
Get the show notes & transcript
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