Overview
This lecture explains the "Turtle Soup" trading strategy, its conditions, entry rules, and how to identify high-probability setups, with practical examples.
Turtle Soup Strategy Basics
- Turtle Soup is an entry model based on taking trades around internal (range) and external (breakout) liquidity zones.
- It involves selling above old highs or buying below old lows, targeting where "dumb money" sets stop orders.
- Internal range liquidity refers to stops placed within the current range; external liquidity lies beyond these levels.
- Smart money seeks to buy at or below resting sell stops and sell at or above resting buy stops.
Setting Up the Trade
- Align Turtle Soup entries with the overall bias or expected liquidity draw (bullish or bearish).
- For a bearish setup: sell above old highs and target new lows; for bullish, buy below old lows and target new highs.
- Confirm setups with key levels like fair value gaps (areas where price may bounce) for added conviction.
- Use overlapping signals such as SMT (Smart Money Technique) divergence and fair value gaps for higher quality trades.
Trade Example Breakdown
- Identify the overall liquidity draw at the start of the day (bullish or bearish bias).
- Wait for market structure shift and displacement, which signal possible Turtle Soup entries.
- Look for price to revisit a swing low (for a long) or swing high (for a short), triggering stops and providing entry.
- Enter the trade at the stop sweep, setting stop-loss just beyond the liquidity level, and target external liquidity.
Improving Skill and Execution
- Backtest Turtle Soup by looking for setups in historical charts and journal your observations and results.
- Reflect on both successful and unsuccessful trades to refine pattern recognition and decision-making.
- Regular journaling and self-analysis are key to long-term improvement in trading.
Key Terms & Definitions
- Liquidity — Areas where clusters of stop orders are placed (buy stops above highs, sell stops below lows).
- Fair Value Gap — A price range where minimal trading occurred, often acting as support or resistance.
- SMT (Smart Money Technique) — Comparing different related markets to identify divergence and confirm trade setups.
- Displacement — A strong move out of a range indicating a shift in market structure.
- OT (Optimal Trade Entry) — A price zone within a move where a trade entry is most favorable.
Action Items / Next Steps
- Begin backtesting the Turtle Soup strategy on historical charts and journal each setup.
- Review 'Daily Bias' concepts for deeper understanding of market direction.
- Consistently practice journaling both trades and trade ideas to track improvement.