If you’re looking to get ahead in the trading world and catch key price reversals, the ICT Turtle Soup trading strategy might be just what you need. Developed by Michael Huddleston, this strategy focuses on stop hunts and false breakouts, helping traders spot quick reversals that can lead to potential gains.
In this guide, we’ll walk you through the ICT Turtle Soup strategy in simple terms. Whether you’re new to trading or have years of experience, you’ll find this information accessible and easy to understand.
What Is the ICT Turtle Soup Pattern?
The ICT Turtle Soup pattern is a trading setup that looks for false breakouts in the market. Here’s how it works:
Imagine the price of a currency pair is moving between a support level (a price floor) and a resistance level (a price ceiling). Traders often expect that if the price breaks through these levels, it will continue in that direction. However, sometimes the price breaks through but then quickly reverses. This is called a false breakout.
The Turtle Soup strategy aims to spot these false breakouts. It identifies when the market is “hunting” for stop orders placed by other traders above resistance levels or below support levels. By recognizing these moves, you can position yourself to profit when the price snaps back into its previous range.
Why Is It Called “Turtle Soup” Trading?
You might wonder about the unusual name. Back in the 1980s, traders Richard Dennis and William Eckhardt developed a system called “Turtle Trading.” Their method focused on trading real breakouts.
The ICT Turtle Soup strategy, on the other hand, turns this idea upside down. Instead of trading genuine breakouts, it looks for failed ones. In a way, it’s like making “soup” out of the “turtles” (the original breakout traders) by turning their losing trades into your winning ones. It’s a humorous nod to the original strategy while highlighting its opposite approach.
How to Use the ICT Turtle Soup Trading Strategy
To effectively use this strategy, you’ll need to follow a few steps:
- Check the Higher Timeframe Trend: Start by looking at a higher timeframe chart (like the 1-hour or daily chart) to see the overall direction of the market. This gives you the “big picture” and helps you trade in the direction of the main trend.
- Identify Key Support and Resistance Levels: Mark important support and resistance levels on your chart. These are price levels where the market has previously reversed or stalled.
- Look for Internal Range Liquidity Levels: On a lower timeframe (like the 15-minute chart), find recent highs and lows within the current range. These are areas where other traders might have placed their stop orders.
- Watch for False Breakouts: Wait for the price to break through a key support or resistance level and then quickly reverse back into the range. This is a sign that a false breakout has occurred.
- Confirm with Market Structure Shift: To increase your confidence, look for a change in market structure on an even lower timeframe (like the 5-minute or 1-minute chart). This means the price starts making higher highs and higher lows (for a bullish reversal) or lower highs and lower lows (for a bearish reversal).
- Enter the Trade: Once you’ve confirmed the false breakout and market structure shift, you can enter a trade in the direction of the reversal. Set your stop loss just beyond the recent high or low to manage your risk.
Best Timeframes and Pairs for Turtle Soup Trading
The ICT Turtle Soup strategy can be used across different markets and timeframes, but here’s what many traders prefer:
- Timeframes: Use the 15-minute chart to identify internal range liquidity levels and the 5-minute or 1-minute chart to confirm false breakouts and market structure shifts.
- Currency Pairs and Markets: This strategy was first tested on indices like NASDAQ and the S&P 500 with great success. Traders have also applied it to major forex pairs like GBP/USD and EUR/USD, as well as metals like gold (XAU/USD).
Why the Turtle Soup Strategy Works
The key idea behind the Turtle Soup strategy is understanding how big players in the market (like banks and institutions) move the price to trigger stop orders. They push the price beyond key levels to collect liquidity and then reverse the price in the opposite direction. By recognizing this pattern, you can trade alongside these big players instead of getting caught in their traps.
Final Thoughts
The ICT Turtle Soup trading strategy offers a way to spot and capitalize on false breakouts in the market. By patiently waiting for the right setups and confirming them with market structure shifts, you can improve your trading results. Remember to always manage your risk by setting appropriate stop losses and never risking more than you can afford to lose.
FAQs About the ICT Turtle Soup Trading Strategy:
The main goal of the ICT Turtle Soup strategy is to identify and trade false breakouts at key support and resistance levels. By spotting when the market is hunting for stop orders and likely to reverse, traders can enter positions that capitalize on these quick reversals.
Traditional breakout trading involves entering trades when the price breaks through support or resistance levels, expecting it to continue in that direction. The Turtle Soup strategy does the opposite; it looks for situations where the breakout fails, and the price returns to its previous range, allowing traders to profit from the reversal.
Yes, beginners can use this strategy, but it’s important to understand basic trading concepts like support and resistance, market structure, and timeframes. Practicing on a demo account before trading with real money can help new traders become comfortable with identifying false breakouts and executing trades using this method.
The Turtle Soup strategy works well in markets that have clear support and resistance levels and where false breakouts are common. This includes major forex pairs like GBP/USD and EUR/USD, indices like NASDAQ and the S&P 500, and metals like gold. It’s important to choose a market you’re familiar with and one that fits your trading style.
Risk management is crucial in any trading strategy. When using the Turtle Soup method, always set a stop loss just beyond the recent high or low that was breached during the false breakout. This limits your potential loss if the market doesn’t reverse as expected. Additionally, consider your position size and never risk more than a small percentage of your trading capital on a single trade.