Abstract Do Turtles Have Fat Tails? Donchian Channels a nd T urtl e Trading: The Case of Soybeans Da vid L. Rayome and Abhij it Jain Th e mov ie "Trading Pl aces" starring Dan Aykroyd and Eddie Murph y premiered in 1983 and co ncerned a fri endly wager between two long time traders as to whether traders were born or could be "made". Unbeknownst to the cast of the movie, a real experiment was taki ng place in Chicago at the sa me ti me. Ric hard Dennis had advertised in the Wall Street J ou rn al, selected ten candidates (a nd added three others), and taught them to trade like ''turtles''. Twenty yea rs lat er their story is the s tu ff of lege nd . T hi s paper attempts 10 simulate '''Turtle Trading" to ascertai n whether the legend holds ke rn els of truth. More importan tl y, the research provides information on whether th e turtle system has merit, and what the more important ingredients might be. Th e system, a channel breakout system, is tested with data from soybean futures contracts over a 27 year pe riod; from 1980 into 2007. An initi al amount of capital of grow s to $ 187,762.50 under th e best case scenario. One of the mo st important ingredient s in the turtle sys tem is the use of stops to preserve capital. Indeed, the capital preservation rules may be the most important ingredient. Random behavior in the fin anc ial markets, as predicted by efficient market proponents, would lead to normal distrib uti ons of re turns wi th "skinny" tail s. Trend traders, li ke the turtles, believe that prices move in trends that defy the description of random movement. These tre nd s lead to distributions of returns wit h "fat tails". The analysis of more than 100 futures contracts and several hundred trades over more than 27 years in th is paper lend credence to the idea that the '''Turtles'' do ha ve "fat ta ils". I. Introduction Richard Den ni s and hi s partner William Eckhardt conducted an experiment in Chicago in the 1980s. Th ey taught a group of new traders their "turtle" system and supplied them with capital to begin trading. Some repo rt s indicat e that the turtles earned annual average rates of re turn approachi ng 80 pe rcent fo r most of that decade. The '" Turtle" system became the stuff of legend into the 1 990s until some of the former turtles began conduct in g se minars to teach ot hers how to invest like a turt l e. Since th at time various web si te s and books have appeared related to "turtle trading". This study analyzes the "turtle trad ing system" th at has been published in recent years. The system is based on a fo rm of channel breakouts first expos it ed by Ri chard Donch ian. Richard De nn is, a legendary commod i ti es trader further developed the breakout sys tem. Th is was the system named "Turt le Trading", so named for the two groups of traders Dennis hired and trai ned in th e 1980' s. This paper utilizes the system Dennis taught hi s traders to determine its success in tradi ng soybean futu res contracts from 1980 until early 2007. Soybeans are a good David L. Rayome is Associate Professor at Northern Michigan University. Abhijit is Assistant Professor at Northern Michigan University