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The Turtle Soup trading strategy

The Turtle Soup trading strategy

2020-08-17 • Updated

Information is not investment advice

We’ve already explained to you the so-called Turtle Traders who were making their trading decisions by following a predetermined set of rules. With the help of Richard Dennis and William Eckhardt, they managed to earn about 100 million dollars in a short period.  Later, their experience was adapted to the changing market realities by another famous commodity and futures trader Linda Bradford Raschke. She created a new and effective strategy called the Turtle Soup.

The main idea of this strategy is based on finding false breakouts.  When short-term breakouts occur, the profit will be minimal or equal to zero. However, if you face a mid-term or a long-term breakout, your chances of reaching a high profit may be quite high.

Key elements of the strategy

Timeframe: no less than M15

Currency pair: any

Algorithm of the strategy for the “buy” scenario

  1. Open a chart. The last 20 candlesticks are your field for the analysis. We recommend highlighting this period with a rectangle. The rectangle may be moved further as new candlesticks appear.
  2. Find the high and low of the range and mark them with horizontal lines.
  3. The minimum and maximum levels should be located at a distance of at least 4 days from your today’s trade.
  4. Wait for the fall of the price below the period’s low.
  5. Place the buy stop order 5-10 pips above the 20-candle lowest level. This order will be relevant only for the current candlestick. If it is not triggered until this candlestick is closed, it is recommended to delete the order.
  6. You place stop loss 5-15 pips below the current minimum.
  7. Your take profit should be 5-10 pips below the upper border of a rectangle.

Let's consider an example. On the H4 chart of AUD/USD, we highlighted the 20-period consolidation. The highest point here is at 0.6645, while the lowest lies at 0.6433. The false breakout appeared on March 9 with the long candlestick falling below the range. We placed a “buy stop” order at 0.6443, stop loss at 0.6302, and take profit at 0.6620. The order was implemented successfully.

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Watch the "Buy" approach:

Watch a step-by-step explanation of the buy scenario of the strategy

Algorithm of the strategy for the “sell” scenario

For a "sell” order we make alternative steps.

  1. Choose the range of the last 20 candlesticks, find the high and the low of this period.
  2. The minimum and maximum levels should be located at a distance of at least 4 days from your today’s trade.
  3. Wait for the breakout of a price to the upside.
  4. Place the sell stop order 5-10 pips below the 20-candle highest level. Remember, that the order should be triggered only within this candlestick.
  5. You place stop loss 5-15 pips above the current maximum.
  6. Your take profit should be 5-10 pips above the support line of the rectangle.

Let’s consider the situation on M15 of USD/JPY. The highest level here is placed at 107.55, while the lowest lies at 107.21. After a surge on June 15, the pair broke the resistance of a range. We placed a sell stop order at 107.5. Our stop loss lies at 107.6, while take profit goes to 107.26.

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Is it necessary for the order to be triggered only within the candle which caused the breakout of a range? Well, according to the rules of the Turtle Soup strategy, it is. However, there is also the Turtle Soup + One strategy. The main difference between the original and modified strategies lies in the time of entry. For the second strategy, the candlestick needs to close outside the range after the breakout. After that, you place an order 5-10 pips above the 20-candle lowest level for a buy order or below the 20-candle highest level for a sell order. 

The Turtle Soup strategy shows us that following simple rules may help you to get effective results. So, why not try it out?

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