What Is the Turtle Soup Trading Strategy?
The Turtle Soup trading strategy is a reversal-based method designed to profit from failed breakouts in financial markets. Instead of following price momentum when it breaks key levels, the Turtle Soup approach looks for fake-outs—moments when price breaks a support or resistance level, triggers stop-losses, and quickly snaps back inside the range.
This strategy was introduced by Linda Bradford Raschke, a renowned trader and author. It evolved as a contrarian alternative to the original Turtle Trading system developed by Richard Dennis and William Eckhardt in the 1980s.
Where the original Turtles focused on trend-following breakouts, Raschke’s method turns those same breakout points into reversal opportunities, especially when big players use liquidity to trap retail traders.
Turtle Soup vs. Original Turtle Trading
| Feature | Turtle Trading | Turtle Soup Trading |
|---|---|---|
| Created By | Richard Dennis & William Eckhardt | Linda Bradford Raschke |
| Market Approach | Trend-following | Contrarian / Reversal |
| Entry Trigger | Breakout beyond recent highs/lows | Failed breakout that reverses |
| Goal | Ride large trends | Capture sharp reversals |
| Best Market Type | Trending markets | Ranging or choppy markets |
The Turtle Soup strategy capitalizes on the psychology of stop-hunting, where large institutional traders trigger stops above or below swing levels before reversing the price direction.
Core Concepts of the Turtle Soup Strategy
To trade the Turtle Soup effectively, you must understand several key market concepts that drive its logic.
1. Liquidity and Liquidity Sweeps
Liquidity refers to zones where clusters of stop-loss orders accumulate—typically around obvious swing highs and lows.
- Buyside Liquidity (BSL): Stops above swing highs.
- Sellside Liquidity (SSL): Stops below swing lows.
A liquidity sweep happens when price pierces these levels to trigger stops and then quickly reverses, signaling a potential trade setup.
2. Stop-Loss Hunting
Big market participants often trigger stop orders to gather liquidity for their own trades. Turtle Soup traders look to fade these stop hunts by entering in the opposite direction once the trap is sprung.
3. Market Structure Shift (MSS)
A Market Structure Shift marks a potential reversal.
- A bullish MSS occurs after price sweeps sellside liquidity and forms a higher high.
- A bearish MSS occurs after price sweeps buyside liquidity and forms a lower low.
This structure shift confirms that the breakout failed and a new short-term trend may begin.
4. Fair Value Gaps (FVG) and Order Blocks
ICT-style traders enhance the Turtle Soup method by watching for Fair Value Gaps (imbalances) and Order Blocks—zones where large moves originate. These areas often act as entry or retracement points after the false breakout.
How the Turtle Soup Strategy Works
Step 1: Identify Key Swing Levels
Start with a higher timeframe (e.g., 4-hour or daily chart). Mark recent swing highs and lows—these represent liquidity zones where stop orders tend to cluster.
Step 2: Watch for a False Breakout
When price breaks below a previous swing low (or above a swing high), look for it to fail—meaning it doesn’t continue in that direction and instead reverses sharply.
Step 3: Confirm the Reversal
Wait for:
- A reversal candle (such as a pin bar or engulfing pattern).
- A market structure shift on a lower timeframe (15M–1H).
- Price reclaiming the broken level, closing back inside the prior range.
Step 4: Execute the Trade
- Bullish Setup: Enter long when price closes back above the broken support after sweeping sellside liquidity.
- Bearish Setup: Enter short when price closes back below the broken resistance after sweeping buyside liquidity.
Step 5: Manage Risk and Take Profits
- Stop-Loss: Just below the swing low (for longs) or above the swing high (for shorts).
- Take Profit: At the next significant support/resistance or liquidity level.
- Risk/Reward: Aim for at least 1:2 R:R to maintain profitability even with partial losses.
Example: Bullish Turtle Soup Setup
- On a 4-hour chart, identify a recent swing low at 1.2700 in GBP/USD.
- Price dips below this level to 1.2680, triggering stop-losses.
- A strong bullish engulfing candle closes back above 1.2700.
- Enter a long position above the candle’s high.
- Set a stop-loss below the 1.2680 low and target the next resistance near 1.2800.
This setup transforms a liquidity grab into a profitable reversal opportunity.
The ICT Version: Turtle Soup with Smart Money Concepts
The ICT (Inner Circle Trader) Turtle Soup variation builds on Raschke’s foundation by integrating smart money concepts, giving traders additional confirmation signals.
Key ICT Enhancements:
- Liquidity Grab: Detect where price sweeps highs/lows to trigger stops.
- Break of Structure (BOS): Confirms directional shift after liquidity sweep.
- Fair Value Gap (FVG): Marks imbalance areas likely to be revisited.
- Order Blocks: Define zones of institutional buying/selling interest.
By combining these with the traditional Turtle Soup structure, ICT traders achieve tighter entries and more accurate reversals.
Best Markets and Timeframes
The Turtle Soup strategy is multi-market adaptable and functions best under specific conditions:
| Market Type | Works Best When | Recommended Timeframes |
|---|---|---|
| Forex | During range-bound or sideways conditions | 15M, 30M, 1H |
| Indices (e.g., S&P 500) | During consolidation before major news | 1H, 4H |
| Commodities (Gold, Oil) | At psychological round levels | 1H, 4H |
| Crypto | After stop-hunt spikes or fake breakouts | 15M, 1H, 4H |
Avoid applying Turtle Soup during strong trending phases, as price may continue running after the breakout instead of reversing.
Advantages and Limitations
Advantages
✅ Captures sharp reversals with defined risk.
✅ Works across multiple asset classes.
✅ Clear, rules-based structure ideal for systematic trading.
✅ Avoids the trap of chasing false breakouts.
Limitations
❌ Struggles during trending markets.
❌ Requires patience and confirmation to avoid fake signals.
❌ Misidentifying liquidity sweeps can lead to early entries.
Tips for Mastering Turtle Soup
- Combine higher timeframe liquidity with lower timeframe entry signals.
- Wait for confirmation—don’t pre-empt the reversal.
- Keep stops tight but logical—below/above the liquidity sweep.
- Backtest setups across various market conditions.
- Log every trade to refine your understanding of sweep and reversal behavior.
Conclusion
The Turtle Soup Trading Strategy flips traditional breakout logic on its head. Instead of chasing price momentum, it waits for the moment when the market fakes out, triggers stops, and snaps back—a perfect setup for contrarian traders.
By combining Linda Raschke’s original reversal logic with ICT’s smart money refinements, this method offers a disciplined, liquidity-aware framework for short-term reversals and swing trades.
