Turtle N Normalized

2020년 9월 13일

Simple script that calculates the normalized value of N. Rules taken from an online PDF containing the original Turtle system:

"The Turtles used a volatility-based constant percentage risk position sizing algorithm. The Turtles used a concept that Richard Dennis and Bill Eckhardt called N to represent the underlying volatility of a particular market.

N is simply the 20-day exponential moving average of the True Range, which is now more commonly known as the ATR. Conceptually, N represents the average range in price movement that a particular market makes in a single day, accounting for opening gaps. N was measured in the same points as the underlying contract.

The Turtles built positions in pieces which we called Units. Units were sized so that 1 N represented 1% of the account equity. Thus, a unit for a given market or commodity can be calculated using the following formula:

Unit = 1% of Account/(N x Dollars per Point)"

To normalize the Unit formula, this script instead takes the value of (close/N). Dollars per point = 1 for stocks and crypto, but will change depending on the contract specifications for individual futures.

"Since the Turtles used the Unit as the base measure for position size, and since those units were volatility risk adjusted, the Unit was a measure of both the risk of a position, and of the entire portfolio of positions."

When the value of N is high, volatility is low and you should be more risk-on.
When the value of N is low, volatility is high and you should be more risk-off.