Have you ever wanted to spot key market reversals before they happen? The ICT Turtle Soup trading strategy, developed by Michael Huddleston, might be just what you’re looking for. This approach focuses on identifying false breakouts and stop hunts around important support and resistance levels. By understanding this strategy, you can stay ahead of other traders and capitalize on short-term price reversals.
What Is the ICT Turtle Soup Pattern?
The ICT Turtle Soup pattern revolves around the idea of hunting stop orders placed by other traders just above key resistance levels or just below key support levels. In simpler terms, it looks for moments when the price briefly moves beyond these significant levels but then quickly reverses direction.
This pattern is especially useful in markets that are ranging—that is, when prices are moving up and down within established highs and lows without a clear long-term trend. Many traders see a breakout past support or resistance as a signal to continue in that direction. However, the ICT Turtle Soup strategy views these brief breakouts as false moves, offering an opportunity to trade the reversal.
The price often makes these moves for two main reasons:
- To Balance Any Imbalance: The market seeks equilibrium, so it may move to correct any unevenness in buying and selling pressures.
- To Hunt Liquidity: Large players might push the price to trigger stop orders, creating the liquidity they need to enter or exit big positions.
Once the price has hunted liquidity on one side, it often reverses to balance out any imbalances or to target liquidity on the other side.
The Story Behind the Name “Turtle Soup”
You might be wondering why it’s called the “Turtle Soup” strategy. Back in the 1980s, two traders named Richard Dennis and William Eckhardt developed a method known as “Turtle Trading.” Their approach was all about trading real breakouts as signals for potential trades.
The ICT Turtle Soup strategy plays on this idea but flips it around. Instead of looking for genuine breakouts, it aims to profit from failed ones. It’s like making “soup” out of the “turtles” by turning unsuccessful breakouts into profitable trading opportunities. The name is a playful nod to the original Turtle Trading method.
How to Trade Using the ICT Turtle Soup Strategy
To effectively use the Turtle Soup pattern, you’ll need to follow a few steps:
- Identify the Higher Timeframe Order Flow: Look at larger timeframes to understand the overall market direction. Are prices generally moving up or down?
- Find the Higher Timeframe Draw on Liquidity Levels: Determine key support and resistance levels where the price is likely to seek liquidity.
- Spot Internal Range Liquidity Levels: On a lower timeframe, identify recent highs and lows within the current range that the price might target.
After you’ve done this:
- Watch for Price Raids: When the price moves to these internal liquidity levels and then returns to the range, it could signal a trading opportunity in the direction of the higher timeframe trend.
- Confirm with Market Structure Shift: Use an even lower timeframe, like the 1-minute chart, to look for signs that the market structure is changing, confirming the false breakout.
By following these steps, you’re essentially waiting for the market to trick other traders with a false move and then jumping in as the price returns to its true path.
Choosing the Best Time Frames
The ICT Turtle Soup strategy works best when you combine insights from different timeframes:
- Higher Timeframes (Hourly, Daily): Use these to understand the overall market trend and identify major support and resistance levels.
- Lower Timeframes (15-Minute, 5-Minute): Use these to spot internal range liquidity levels and confirm false breakouts.
- Very Low Timeframes (1-Minute): Use these for precise entry points and to confirm shifts in market structure.
By analyzing multiple timeframes, you can get a clearer picture of market movements and improve your chances of making successful trades.
Selecting the Right Trading Pairs
Initially, the ICT Turtle Soup strategy was tested on stock indices like the NASDAQ (NQ Futures) and the E-mini S&P 500, where it showed excellent results. Over time, traders have found it effective in other markets as well, including:
- Forex Pairs: Major currency pairs like GBP/USD and EUR/USD are popular choices.
- Metals: Gold (XAU/USD) is another market where this strategy can be applied successfully.
The key is to choose markets with enough liquidity and volatility to create the false breakouts that the Turtle Soup strategy seeks to exploit.
Final Thoughts
The ICT Turtle Soup trading strategy offers a unique way to look at market movements by focusing on false breakouts and liquidity hunts. By understanding how big players in the market operate and how price movements can trick traders, you can position yourself to take advantage of these situations.
Remember, like any trading strategy, it’s essential to practice and refine your approach. Use demo accounts to get comfortable with identifying patterns and executing trades before risking real money. With patience and experience, the ICT Turtle Soup strategy can become a valuable tool in your trading arsenal.
Frequently Asked Questions (FAQs)
The primary goal of the ICT Turtle Soup strategy is to profit from false breakouts around key support and resistance levels. By identifying when the price briefly moves beyond these levels and then quickly reverses, traders can enter positions that capitalize on these short-term reversals.
Traditional breakout trading involves entering a trade when the price moves beyond a support or resistance level, expecting it to continue in that direction. The ICT Turtle Soup strategy does the opposite. It anticipates that the breakout is false and that the price will reverse, allowing traders to profit from the move back into the range.
Yes, beginners can use this strategy, but it’s important to have a basic understanding of market concepts like support and resistance, liquidity, and timeframes. Practicing on a demo account can help new traders get comfortable with identifying the patterns and executing trades without risking real money.
While the strategy was initially tested on indices like the NASDAQ and the E-mini S&P 500, it has been successfully applied to forex pairs like GBP/USD and EUR/USD, as well as metals like gold (XAU/USD). The key is to choose markets with sufficient liquidity and volatility.
Time frame selection is crucial. Using higher timeframes helps you understand the overall market trend and identify key support and resistance levels. Lower timeframes allow you to spot internal range liquidity levels and confirm false breakouts. Combining multiple timeframes increases the accuracy of your trade entries and exits.
