Introduction
If there’s one thing I’ve learned in my forex journey, it’s that markets are full of surprises. No matter how much experience you have, there are always moments when price action behaves unexpectedly. That’s why the Turtle Soup trading strategy has become one of my go-to methods. This strategy allows me to capitalize on market reversals, specifically at daily high and low points, without having to pick a long-term directional bias. Essentially, I’m trading against the retail crowd—catching those moments when the market decides to flip and take out stops.
In this post, I’ll guide you through the Turtle Soup trading strategy, focusing on how we can leverage the Daily High/Low of pairs like EUR/USD and GBP/USD to capture profitable reversals. I’ll also explain how using Ka$h Alerts and FX Levels from ElevatedFX can help automate parts of the strategy, making it even more effective.
What Is the Turtle Soup Trading Strategy?
The Turtle Soup trading strategy is a type of counter-trend reversal strategy. The core idea here is simple: we want to spot areas where the majority of traders are wrong and jump in at those points for quick, profitable trades. The name “Turtle Soup” comes from an old trading legend involving the original Turtle Traders who made big profits using very disciplined trading approaches. The “soup” element refers to a twist on their breakout strategy—one that involves fading breakouts rather than following them.
Unlike many traditional breakout strategies that require a trader to follow the trend, Turtle Soup looks for false breakouts around the daily highs and lows. This setup works especially well on pairs like EUR/USD and GBP/USD, which often see strong liquidity sweeps before reversing direction.
Why the Daily High/Low?
From my experience, the Daily High/Low is a critical level for all major currency pairs. Price action tends to gravitate toward these levels during the trading day, often enticing traders to jump in and assume that a breakout is underway. This leads to false breakouts, where the price initially breaches the high or low but then quickly reverses, trapping traders on the wrong side.
Why does this happen? It’s largely due to liquidity hunts. Institutions and market makers understand where retail traders tend to place their stops—often just above a high or below a low. The Turtle Soup strategy takes advantage of these moments when price “clears out” those levels and then reverses as institutional players take profits or push the market in the opposite direction.
This is where automation tools like Ka$h Alerts come in handy. By setting alerts for potential Daily High/Low breakouts, I can be immediately notified when price approaches these levels, making sure I’m ready to capitalize on a Turtle Soup setup.
Identifying a Turtle Soup Setup
Step 1: Watch for Price Nearing Daily High/Low
The first step in this strategy is to identify when the price is approaching the Daily High or Low. For this, I like to use FX Levels, which highlights key market levels for me, including the daily high and low. By automating the spotting of these crucial levels, I don’t have to spend hours monitoring charts manually—I can let my tools do the work.
Let’s say we’re trading the EUR/USD pair. If the price approaches the previous day’s high, this could be an opportunity for a Turtle Soup setup. I set an alert using Ka$h Alerts to notify me when the price breaches this level.
Step 2: Look for the False Breakout
Once the price hits the daily high or low, I want to watch carefully to see if we get a false breakout. This is key to the Turtle Soup strategy: instead of the price continuing to move in the breakout direction, I wait for a quick snap-back. Essentially, I’m waiting for price action to invalidate the breakout.
This false breakout is often accompanied by a quick candle that closes back below the high or above the low. This tells me that the breakout didn’t have enough strength and that most of the traders that jumped in are now likely caught on the wrong side. This is exactly the scenario we’re looking for—where price clears out the liquidity and then reverses.
Step 3: Entering the Trade
After identifying the false breakout, my entry point is often when the next candle confirms that price is reversing. The key here is to enter against the failed breakout move. For example, if EUR/USD breaks above the previous day’s high but then quickly falls back below, I’d look to short EUR/USD. Conversely, if the price fails below a low, I’d look to go long.
To keep myself disciplined, I use Ka$h Alerts to trigger my entry conditions. This automated approach ensures that I get into trades that match my exact criteria without hesitation. The automation provided by ElevatedFX’s tools also means that I can reduce emotional mistakes that I’d be prone to when manually monitoring and entering trades.
Risk Management: Protecting Your Capital
I’ll be honest—no strategy is worth its salt without proper risk management. For Turtle Soup, my stop-loss is placed just beyond the high or low that was initially breached. This means if price turns back in favor of the breakout, I get out quickly, minimizing losses.
In terms of Risk-Reward Ratio (RRR), I generally aim for at least 1:2. Since the Turtle Soup setup is highly reactive to sudden reversals, it’s often possible to capture a decent move in the opposite direction with a relatively small stop-loss. Here’s an example table of how I like to set my RRR for these trades:
| Trade Type | Entry Condition | Stop-Loss | Target Profit |
|---|---|---|---|
| Long Trade | Price false breakout below daily low | Just below the false breakout | 2x the risk |
| Short Trade | Price false breakout above daily high | Just above the false breakout | 2x the risk |
By automating this part of my trade management using Ka$h Alerts, I don’t need to constantly watch the screen—my system manages these risk parameters for me.
Using ElevatedFX Tools to Enhance Turtle Soup
Trading is all about timing and discipline, and let’s be real, we don’t always have the luxury of sitting in front of charts all day. This is where ElevatedFX’s Ka$h Alerts and FX Levels shine. These tools have helped me automate the entire process—from identifying the daily high and low to getting alerts for false breakouts.
- Ka$h Alerts help me by notifying me in real-time when price approaches key levels, giving me the upper hand in spotting potential Turtle Soup setups.
- FX Levels keep my chart clean, indicating where the daily high and low are, and allowing me to quickly assess which pairs are primed for this strategy.
Combining human decision-making with these automated tools gives me the best of both worlds: I can leverage the speed and precision of technology while still relying on my analysis and intuition to make the final call.
Pros and Cons of the Turtle Soup Strategy
Pros
- No Directional Bias: I don’t have to predict if the market will go up or down in the long term. The Turtle Soup strategy is all about reacting to price behavior around the daily high or low, which can work in both trending and ranging markets.
- Automation Friendly: With tools like Ka$h Alerts, I can automate much of the identification process, making the strategy more efficient and less stressful.
- High Liquidity Setups: Since I’m trading around daily highs and lows, liquidity is generally high, reducing the chance of slippage and providing better fills.
Cons
- Requires Patience: Not every high or low will result in a false breakout. Sometimes, price will continue in the breakout direction, which is why having discipline and waiting for confirmation is key.
- Quick Reversals: The price action in a Turtle Soup setup can be fast and requires a trader to react quickly, which may be overwhelming for beginners.
- Not Ideal for Strong Trends: If the market is in a very strong trending phase, false breakouts become less frequent, making this strategy less effective during those periods.
Case Study: Turtle Soup in Action
Let’s walk through a hypothetical case. Imagine EUR/USD is trading near its daily high of 1.1100. I receive a Ka$h Alert that price has broken above this level. However, the next candle closes back below 1.1100, signaling a false breakout. At this point, I enter a short position, placing my stop-loss just above the high at 1.1120.
Within the next hour, price drops to 1.1050, and I book profits based on a 1:2 risk-reward ratio. Without the Ka$h Alert notifying me in real time and FX Levels marking the key level clearly, I could have easily missed this profitable setup.
Conclusion: Incorporate Hybrid Elements to Maximize Success
The Turtle Soup strategy is a powerful tool for traders who are willing to counter the herd mentality. By focusing on the Daily High/Low and leveraging Ka$h Alerts and FX Levels, I’ve managed to make this strategy both efficient and effective. The beauty of Turtle Soup lies in its simplicity—you don’t need a directional bias, just patience and the right tools to capitalize on market reversals.
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