Last Updated on 14 October, 2021 by Samuelsson
There are many stories of veteran traders who experienced booms and burst in the financial markets, but the incredible story of Richard Dennis, an astonishingly rich genius and pioneer of commodity trading, is outstanding. Richard started early and gradually traded himself to the height of his career with astute management skills and clear strategies.
Born in January 1949, Richard Dennis became an order runner on the Chicago Mercantile Exchange trading floor in 1966, at the age of 17 years. When he was only 23 years old, he reportedly borrowed $1,600 and turned it into $200 million in about ten years of trading commodities. By the time he was 26 years old, he was already a millionaire trader.
Richard Dennis is popularly known as the “Prince of the Pit.” Following the stock market crash in 1987, he incurred significant losses, making him retire for many years.
During this period, Dennis was busy managing pools of capital for others in the markets for a while, but he stopped abruptly in the spring of 1988 after his clients suffered heavy losses. He reportedly lost about lost $10 million during the Black Monday crash of 1987 and also went on to lose approximately $50 million in 1987–1988. He also managed funds for some time in the mid and late 1990s, closing these operations after losses in the summer of 2000.
While Dennis is known for making and losing a lot of money, he’s also known for something else — the Turtle experiment. Dennis believed that successful trading could be taught. To settle a debate on that point with William Eckhardt, a friend and fellow trader, he took a handful of men and women from obscurity and taught them to trade futures. According to a former student, these so-called Turtle Traders went on to earn profits of $175 million in 4 years, or an 80% compounded rate of return.
In addition, they were taught to cut position size during losing periods and to pyramid aggressively by up to a third or a half of total exposure. However, only 24% of total capital would be exposed at any one time. This type of trading system will generate losses in periods when the market is range-bound, often for months at a time, and profits during the large market move.
Dennis earned a bachelor’s degree in philosophy from DePaul University, then accepted a scholarship for graduate study in philosophy at Tulane University, but changed his mind and returned to trading.
Dennis made significant profits when he bought successively new weekly and monthly highs in the trending inflationary markets of the 1970s, an era of repeated crop failures and the “Great Russian Grain Robbery” of 1972. Those riches didn’t come easy; Dennis was notorious for experiencing intense amounts of volatility.
Dennis held positions for more extended periods, unlike many scalpers that would open and close during the trading day. He also has some publishing credits as he published various articles in The New York Times, The Wall Street Journal, and the Chicago Tribune.
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