Turtle Soup - How Smart Money Actually Trades

Summary

In this video, the concept of 'turtle soup' in trading is explained, focusing on the strategy of buying beneath an old low and selling above an old high to capture liquidity. The speaker emphasizes the importance of understanding external range liquidity, avoiding traditional market structure shifts, and using higher time frame analysis. Examples from live trades, including a 1 to 20 risk-to-reward ratio short trade, are provided to demonstrate the technique. The video also highlights key trading concepts such as smart money tactics, liquidity runs, and the use of order blocks and breakers to refine entries.

Takeaways

• 😀 Turtle Soup is a trading strategy focused on exploiting external range liquidity by entering the market when price trades above an old high or below an old low.
• 😀 The strategy avoids waiting for market structure shifts or advanced concepts like fair value gaps, breaker blocks, and PDs (premium displacement).
• 😀 A bullish trade involves buying beneath a previous low, while a bearish trade involves selling above a previous high.
• 😀 Traders do not rely on waiting for complex confirmations like market structure shifts but instead position themselves based on liquidity targets above or below key price levels.
• 😀 The strategy is based on the idea that 'smart money' sells to the buy stops above old highs and buys beneath the sell stops below old lows.
• 😀 A key tool used in this strategy is the concept of state delivery, where price shifts from a buy to a sell program or vice versa.
• 😀 The speaker demonstrates the strategy with a real-life trade example on the S&P 500, emphasizing a tight stop-loss and a favorable risk-to-reward ratio (1:20).
• 😀 The entry point for a short trade is when price breaks above a significant old high, with a tight stop just above that level.
• 😀 Once a trade is initiated, the trader holds their position targeting lower liquidity levels or previous price lows, while managing risk by placing a tight stop-loss.
• 😀 The strategy involves using a higher time frame for determining the bias (direction) of the market and lower time frames for precise entry points and liquidity levels.

Q & A

What is the concept behind the Turtle Soup strategy?

The Turtle Soup strategy is based on price action where a trader waits for price to exceed old highs or lows, triggering a liquidity hunt. Once this happens, the price is expected to reverse, providing an opportunity to trade in the opposite direction and capitalize on the movement.

How does the Turtle Soup strategy relate to market manipulation?

The strategy takes advantage of market manipulation by large institutional players (smart money). When the price moves above an old high or below an old low, it triggers buy or sell stops from retail traders, which smart money uses to enter trades in the opposite direction.

What is external range liquidity in the context of the Turtle Soup?

External range liquidity refers to the buy or sell stops placed outside the range of recent highs and lows. The Turtle Soup strategy involves trading around these levels, where smart money can exploit the liquidity triggered by these stops.

Why does the trader enter a short position when price exceeds an old high?

The trader enters a short position when the price breaks above an old high because it triggers buy stops. After the liquidity is collected, the price is expected to reverse, allowing the trader to profit from the downward move.

What role do 'order blocks' play in the Turtle Soup strategy?

Order blocks represent areas where large institutional players have placed significant orders. In the Turtle Soup strategy, the price may reverse once it reaches these blocks, signaling potential trade entries based on institutional behavior.

What is a 'change in state delivery' and how is it used in Turtle Soup?

A 'change in state delivery' refers to a shift in the market's price direction, typically marked by a candle closing in the opposite direction of the prevailing trend. This signals that the market may be reversing, and is used as an entry point in the Turtle Soup strategy.

How does the trader determine the stop loss and take profit levels?

The stop loss is typically placed just above the old high or low where the liquidity run occurred, ensuring that the trade stays within a controlled risk. The take profit level is determined based on the trader’s higher time frame target, usually aiming for a previous low or high.

What is the significance of 'SMT Divergence' in the Turtle Soup strategy?

SMT Divergence refers to a crack in correlation between correlated assets, such as the Dow and S&P 500. When SMT Divergence occurs, it signals that smart money may be involved and can indicate a likely reversal, helping the trader make more informed decisions.

Why does the trader avoid relying on market structure shifts when using the Turtle Soup strategy?

The trader avoids relying on market structure shifts because the Turtle Soup strategy focuses on liquidity runs rather than traditional technical indicators like market structure. The key is identifying when price has reached levels of liquidity, not waiting for market shifts.

How does the Turtle Soup strategy work with higher and lower time frame analysis?

The strategy utilizes higher time frame analysis to identify significant levels of liquidity (such as old highs and lows). Lower time frame analysis is used to spot precise entry points when price reacts to these levels, creating opportunities for more accurate trade entries.