ICT Turtle Soup Model - Explained

Summary

The Turtle Soup trading strategy focuses on capitalizing on liquidity gaps by targeting opposing market movements after price manipulations. Traders look for price to break key support or resistance levels, such as previous highs or lows, to trigger stop orders and then reverse direction. The strategy incorporates concepts like smart money targeting, order blocks, and SMT divergence to enhance accuracy. By framing the market's bias on higher time frames and using tools like Fibonacci retracement, traders can increase the probability of successful trades. The strategy aims to profit from market reversals driven by liquidity hunting and smart money behavior.

Takeaways

• 😀 A Turtle Soup trade involves buying or selling external range liquidity and targeting the opposing liquidity, with a focus on key levels of liquidity like old highs and lows.
• 😀 The method anticipates that smart money will buy or sell at liquidity points, such as beneath old lows or above old highs, and that price will reverse at these levels.
• 😀 The critical concept of framing high probability Turtle Soup trades is rooted in identifying liquidity zones on higher timeframes and trading in the direction of the overall market bias.
• 😀 A bullish Turtle Soup trade example involves price breaking beneath sell side liquidity, with smart money buying those sell stops, and targeting the opposing buy side liquidity.
• 😀 For accuracy, the use of SMT (Smart Money Tool) divergence can be crucial, as it helps determine whether the price is likely to reverse at a particular key level.
• 😀 SMT Divergence can be applied by comparing assets like the NASDAQ, S&P 500, and Dow to confirm whether price is set to reverse at a certain liquidity level.
• 😀 The power of three pattern, seen in certain market movements (open, manipulate, then trade higher), can be used as a confirmation of a bullish Turtle Soup setup.
• 😀 A bearish Turtle Soup setup is identified by a shift to the downside with price reaching buy side liquidity before reversing back lower, often confirmed with SMT Divergence.
• 😀 In both bullish and bearish Turtle Soup trades, smart money manipulates price at liquidity levels (sell stops for bullish, buy stops for bearish), before targeting the opposing liquidity.
• 😀 For optimal entries, it is recommended to trade based on an existing drawn liquidity bias and watch for reversals at sell side or buy side liquidity, with SMT confirmation to increase precision.

Q & A

What is a 'turtle soup' in the context of ICT trading?

A 'turtle soup' refers to a strategy where a trader buys or sells external range liquidity (like sell stops or buy stops) and then targets the opposing liquidity. This often involves manipulating price movements around key levels, such as old lows or highs, to profit from smart money actions.

How does the turtle soup strategy apply when price moves below an old low?

When price moves beneath an old low, a turtle soup strategy involves buying the sell stops that were triggered by that movement, then holding the position to target the opposing liquidity, such as buy-side liquidity, above the old high.

What is the importance of a higher time frame draw on liquidity in the turtle soup strategy?

A higher time frame draw on liquidity helps establish the overall bias of the market, whether the price is likely to expand higher or lower. This sets the direction for identifying turtle soup opportunities, ensuring trades align with the broader market trend.

How do you identify a bullish turtle soup setup using price action?

A bullish turtle soup setup can be identified when price takes out sell-side liquidity (an old low) and then reverses after forming a bullish order block (like consecutive down-close candles). Price then breaks above these candles, signaling a potential move to the opposing liquidity (buy-side).

What role does the 'change in state delivery' play in the turtle soup model?

The 'change in state delivery' signals a shift in market structure, indicating that price is likely to expand in the direction of the new trend. In a turtle soup, this change is identified when price breaks above a significant price level, like a series of consecutive candles, after taking out liquidity.

What is the significance of SMT (Smart Money Technique) Divergence in the turtle soup strategy?

SMT Divergence helps confirm potential reversals at key liquidity levels. If there's divergence between correlated assets (like the NASDAQ, S&P 500, or Dow), it signals that price may reverse after taking out liquidity, making it a useful tool for validating a turtle soup setup.

How can SMT Divergence be used in a bullish turtle soup setup?

In a bullish turtle soup, SMT Divergence occurs when a weaker asset (e.g., Dow) forms a higher low, while a stronger asset (e.g., S&P 500) forms a lower low. This suggests that smart money bought the sell stops and will now target the opposite liquidity (buy-side).

How do you recognize a bearish turtle soup setup using price action?

A bearish turtle soup setup involves price breaking above buy-side liquidity (an old high) and then reversing after forming a bearish order block (like consecutive up-close candles). Price then drops, targeting sell-side liquidity, which is the opposite range.

What is the process for identifying a bearish turtle soup using SMT Divergence?

For a bearish turtle soup, you compare the highs of correlated assets. If one asset (like the S&P 500) exceeds a high while the other (like the NASDAQ) fails to do so, this divergence suggests that smart money has sold into the buy stops, and price is likely to reverse downward, targeting sell-side liquidity.

What should you look for when targeting liquidity in a turtle soup trade?

When targeting liquidity in a turtle soup trade, traders should look for key levels where liquidity is concentrated, such as relative equal highs or lows. The liquidity can be targeted by using Fibonacci retracements, previous swing highs or lows, or significant price levels that smart money is likely to target.