Turtles system believed in diversification in order to spread risk across many instruments and profit opportunities by catching successful trades. This requires making similar bets on many instruments. All bets consists of a constant amount of risk which is calculated specifically for the instrument reprsented in dollars

**Position Units**

The unit is a measure of risk for the position and the entire porofolio of poistion.

In order to unify it among different instruments the turtels follow the folloing method:

- Measure the volatility of the instrument( and they call it the true range of the price movement for the instrument).
- Measure the average of this volatility for a specified period and they call it the Average True Range and represent it by the letter N.
- Measure the dollar volatility of this instrument.
- Measure the unit size of the instrument based in the dollar volatility of this instrument.

They bet in units which represent the same ritsk factor measured in dollars

**True Range & Average True Range (ATR or N)**

True Range of a day (or any other period) is the average range in price movement in a single day.

**True Range**

The following formula is used to calculate the true range of a day:

true range (TR) = maximum(h-L, H-PDC, PDC-L)

**Average True Range**

Is simply the 20 day exponential moving average of the True Range
The following formula is used to calculate the average true range of a 20 day period
for simplicity N will be used to represent the Average True Range (ATR)

average true range (N) = (19 x PDN + TR) / 20

**where:**

**PDN:** previous day’s average true range (N)

**TR:** current day’s true range

As this formula requires the previous day’s N, the 20 day simple average is used instead of N for the initial calculation.

** Dollar Volatility**

After calculating the ATR from the previous step, which merely shows the average range of motion of a certain instrument during a certain period, we can calculate the amount of the change (volatility) expected for each dollar invested in this instrument.

Dollar volatility = ATR (N) x dollar price of the point

Positions are built with what is called “units” and are calculted by the following formula:

unit size = 1% of account / market dollar volatility

or

unit size = 1% of account / N x dollar price of the point

** Risk Mangment rules**

The turtels system imposes a limit on the number of units to be used at any specific time according to following 4 levels rules in order to minimize lossess during prolonged losing periods or when extra ordinary price movments occures due to imposing new monetary rules or political factors.

Level |
Type |
Maximum Units |

1 |
Single market |
4 |

2 |
Closely correlated markets |
6 |

3 |
Loosey correlated markets |
10 |

4 |
Single direction, long short |
12 |