Turtle Soup Trading: What It Is and How It Works

What Is Turtle Soup Trading?

Turtle Soup trading uses reversals after false breakouts. Instead of following price when it breaks a key level, it looks for the moment when the breakout fails.

This shift in price usually comes from stop-loss orders getting triggered and then price snapping back in the other direction.

Linda Bradford Raschke developed this strategy as a twist on the classic Turtle Trading rules. The original method chased breakouts, but Turtle Soup turns these breakouts into opportunities for sharp reversals.

This approach focuses on swing highs and lows where liquidity often pools. It relies on spotting those quick failures in price and acting when the market reveals that the breakout was a trap, not the start of a trend.

Turtle Soup vs. Turtle Trading

Turtle Soup trading and Turtle Trading share a name, but they rely on very different ideas.
 

• Turtle Trading was developed by Richard Dennis and William Eckhardt in the 1980s. It focused on trading breakouts and holding positions as long as the trend remained strong.
   

• Turtle Soup Trading was created by Linda Bradford Raschke as a reversal method. Instead of following breakouts, it waits for failed breakouts and looks for prices to snap back.
   

Turtle Trading adds to winning positions and tries to ride the momentum. In contrast, Turtle Soup uses failed breakouts as clear signals to enter reversals. This difference makes Turtle Soup a contrarian strategy that does not chase trends but looks for quick market traps and sharp reversals.

Key Elements in Turtle Soup

The Turtle Soup trading strategy uses a clear set of concepts to find high-probability reversals. Understanding these elements helps traders spot false breakouts and improve their timing.

Liquidity Sweeps

Big players often target areas where traders place stop-loss orders. When price reaches these zones, it triggers a liquidity sweep. Turtle Soup trading looks for these moves to catch the moment when the market reverses back inside the range.

Stop-Loss Hunting

Stop-loss hunting happens when the market quickly moves beyond a key level to hit stops and grab liquidity. Turtle Soup setups rely on this idea because these moves often reverse sharply when the stops are cleared.

Market Structure Shift (MSS)

A market structure shift shows when price changes direction after a failed breakout. This pattern signals a new reversal move, which Turtle Soup traders use as confirmation that the false breakout is over.

Fair Value Gap (FVG) and Order Block Trading

Price often creates imbalances or gaps in areas where orders build up quickly. These gaps, called Fair Value Gaps (FVG), and areas of previous buying or selling, known as order block trading, help confirm Turtle Soup entries. Price usually returns to fill these gaps before resuming its new direction.

Contrarian Trading Logic

Turtle Soup trading uses a contrarian approach that ignores the trend and focuses on moments when traders expect breakouts to continue but the market turns around. These setups combine key elements to create opportunities to trade false breakout strategies while keeping risk tightly managed.

Turtle Soup Strategy Rules

Turtle Soup trading relies on simple rules that guide traders to spot false breakout setups. These rules let you see where price quickly reverses direction and find clear entry points.

You use swing high/low reversals, liquidity sweeps, and quick price action reversals to catch these sharp moves. Use these Turtle Soup rules to avoid getting trapped by stop-loss hunting and to turn false breakouts into solid opportunities.

Setup for Bullish Reversals

When you trade a bullish reversal, you look for a failed breakout below a recent low. This often signals that price wants to reverse back up, catching traders off guard and creating a strong setup.

Follow these steps to spot the entry:

• Identify the swing low on a higher timeframe chart.

• Watch for prices to dip below this level, triggering stop-losses.

• Confirm the reversal with a bullish candlestick pattern or sudden move back inside the range.

• Enter your buy trade as price closes back above the broken support.

• Place your stop-loss just below the low of the move to control risk.

Setup for Bearish Reversals

For a bearish reversal, you use the same logic but in reverse. The idea is to catch the moment when price moves above a key high, fails to hold, and flips back down.

Use these steps to set up the trade:

• Find the swing high on a higher timeframe chart.

• Wait for price to break above this level, sweeping buy-side liquidity.

• Confirm the bearish shift with a strong reversal candle or quick rejection back under the level.

• Enter your short trade as price closes back below the broken resistance.

• Place your stop-loss just above the swing high to protect your position.

Stop-Loss and Profit Targets

Stops and targets keep your risk in check and give you clear exit points. When you know exactly where to cut losses and take profits, you avoid second-guessing your plan and stay consistent.

Use these guidelines:

• For a long trade, set your stop-loss just below the swing low of the setup.

• For a short trade, set your stop-loss just above the swing high.

• Look for profit targets at the next significant level of support or resistance.

• Aim for at least a 1:2 risk-reward ratio so that even if you lose some trades, you stay profitable in the long run.

ICT Turtle Soup

ICT traders took the original Turtle Soup idea and added a new way to see the market. They focus on how smart money uses liquidity sweeps and quick reversals to trap retail traders.

While the classic Turtle Soup looks for failed breakouts, ICT traders pay close attention to how price fills gaps and returns to fair value levels before it moves again.

This approach blends the core idea of reversals with smart money concepts. It makes Turtle Soup more precise by using tools like market structure shifts, fair value gaps, and order blocks.

How ICT Refines Turtle Soup
 

• ICT does not just look for false breakouts. It studies these moves to see where liquidity grabs happen and how price reveals the real market direction.

• Traders do not jump in at the first sign of a failed breakout. They wait for confirmation that it was only a hunt for stops and not a true breakout.

• ICT also watches fair value gaps and how price revisits these areas before the real move begins. This detail helps traders avoid fake reversals and catch the shift when it starts.

ICT Key Elements

ICT Turtle Soup uses clear ideas to spot where price wants to reverse:

• Liquidity Grab: Price spikes above a high or below a low to hit stops and fill big orders.

• Break of Structure (BOS): After price sweeps liquidity, it quickly breaks the last swing in the new direction. This break of structure shows that the market is no longer following the previous move and confirms the reversal.

• Fair Value Gap (FVG): Sharp moves leave gaps that the market wants to fill before it finds balance again.

• Order Blocks: Zones where strong reversals began, showing where big traders got in.

How to Identify Turtle Soup Setups

Finding a Turtle Soup setup means seeing where price traps traders and then reverses direction. You want to look at the bigger picture first and then confirm the shift on a lower timeframe.

Higher Timeframe Analysis

Start by checking higher timeframes like the daily or 4-hour charts. These charts show the key swing highs and lows where liquidity often builds up. You want to find these levels, also called supply and demand zones, because false breakouts often begin here.

Look for:

• Areas of support or resistance that have held multiple times.

• Swing highs and lows that could trigger stop-loss orders.

• Signs that price might reverse after sweeping liquidity beyond these levels.

Lower Timeframe Confirmation

After spotting those key levels, drop down to a lower timeframe like the 15-minute or 1-hour chart. Here, you watch for the exact moment when price sweeps a level and quickly reverses.

Focus on:

• Sudden moves that break the higher timeframe level and then flip back.

• Strong reversal candles like pin bars or engulfing patterns that show the shift.

• A small break of structure that confirms the reversal.

Turtle Soup in Forex and Other Markets

Turtle Soup trading is not just for one market. It uses the same idea across different areas, looking for false breakouts and quick reversals in price.

Traders apply this method in forex pairs where swings often trap traders, in indices and commodities that create large moves around key levels, and even in crypto and stocks where volatility can trigger sharp reversals.

Best Forex Pairs for Turtle Soup

Many traders use Turtle Soup in forex because of how price moves around key highs and lows. Pairs like EUR/USD, GBP/USD, and AUD/USD often show clean swing highs and lows.

These pairs can create the false breakouts that Turtle Soup setups look for, making them good choices to apply this method. For those wanting to learn more about broader forex trading strategies, there are plenty of resources available to help refine your approach.

Indices and Commodities

Turtle Soup setups also work in indices like the S&P 500 or the NASDAQ. These markets have large price swings that can trap traders during false breakouts.

Commodities like gold (XAU/USD) also show strong reversals after price sweeps key levels. This makes them another place where Turtle Soup can find good entries.

Crypto and Stocks

Crypto and stocks have their own fast price movements and sharp reversals. Turtle Soup setups can work in these markets when price moves above a high or below a low and then quickly snaps back. Traders who watch these levels can use the same Turtle Soup rules to find new trades.

Turtle Soup Trading Examples

These real examples show how Turtle Soup setups work in live markets and help traders spot high-probability reversals.

Bullish Example

One classic bullish setup comes from Linda Raschke’s Turtle Soup rules. It begins when price dips below a 20-day low, triggering stops from traders who expect more downside.

This move often pulls in fresh sellers, but price snaps back above the low with a strong bullish candle. Traders enter long as the candle closes above the low, using a stop-loss just below the day’s low. Targets often sit at the next swing high, turning a failed breakout into a quick reversal trade.

Bearish Example

The bearish setup follows the same idea in the opposite direction. In the ICT variation, price breaks above a key swing high and triggers stops from short traders.

However, the price can’t hold above that level and reverses sharply. A strong bearish candle confirms that the breakout was only a liquidity grab. Traders enter short once price closes back under the high, placing a stop just above it and aiming for the next support level or a previous swing low.

Advantages and Limitations

Turtle Soup trading has strong points and some clear limits. Knowing both helps traders decide when to use this contrarian approach.

Advantages:

• Spots false breakouts and turns them into high-probability reversals.

• Clear rules make it easier to manage risk.

• Works across many markets: forex, indices, commodities, and even crypto.

• Avoids the trap of chasing trends that don’t hold.
   

Drawbacks:

• Works best in ranging or choppy markets, not in strong trends.

• Needs patience to wait for confirmation of reversals.

• Requires a good understanding of liquidity sweeps and quick reversals.

• Can lead to losses if you misread the setup or jump in too early.

Conclusion

Turtle Soup trading flips the usual way of looking at the market. Instead of chasing breakouts, it waits for them to fail and looks for moments when price reverses sharply. This contrarian style helps traders avoid getting caught by false moves and find entries with a clear risk.

The key is to focus on the setups where price grabs liquidity and then snaps back inside the range. With practice and discipline, traders can use these moves to stay on the right side of the market and avoid getting trapped by the usual noise.

This method works in many markets such as forex, commodities, indices, and even crypto, as long as you know what to look for. For those wanting to explore more patterns and how they work, this trading patterns cheat sheet can be a helpful guide.