ICT Turtle Soup Strategy Explained: How to Identify and Trade It
The ICT Turtle Soup is a trading strategy that takes advantage of false breakouts at higher timeframe areas of liquidity. The strategy uses concepts from the Inner Circle Trader (ICT). This article explains the ICT Turtle Soup strategy, liquidity, liquidity sweeps, market structure shifts, and how to trade with the strategy.
What is the ICT Turtle Soup?
The ICT Turtle Soup is a reversal and continuation trading strategy that takes advantage of false breakouts in any market including stocks, crypto, forex, and futures. The strategy uses three concepts from ICT’s teachings: Liquidity, Liquidity Sweeps, and Market Structure. Liquidity are areas where there’s a large amount of buy or sell orders placed. Liquidity sweeps occur when areas of liquidity are traded into, and traded out of. Market structures help determine the market's current trend, such as bullish or bearish.
Liquidity
There are two types of liquidity in the market: Buyside Liquidity (BSL) and Sellside Liquidity (SSL). BSL refers to the levels on the chart where short sellers have their stop losses set, while SSL refers to the levels where traders who are long have their stop losses set. These levels are typically found at highs/lows of ranges and are seen as areas where traders exit losing positions. This guide explains how to identify and trade buyside liquidity and sellside liquidity.
Liquidity Sweep
Liquidity sweeps occur when large orders are placed in the markets to trigger numerous pending buy or sell orders, resulting in rapid price movements. These sweeps occur at buyside and sellside liquidity levels. A sweep of sellside liquidity occurs when price comes down to a SSL level, goes below it, and shoots back up. A sweep of buyside liquidity occurs when price comes up to a BSL level, goes above it, and shoots back down.
Market Structure Shift
A Market Structure Shift (MSS) allows traders to identify potential trend reversals in the market.
A bullish MSS is formed when a low (L) occurs, followed by a lower high (LH), then a lower low (LL), and finally, a higher high (HH) that breaks the previous lower high.
A bearish MSS is formed when a high (H) occurs, followed by a higher low (HL), then a higher high (HH), and finally, a lower low (LL) that breaks the previous higher low.
How To Identify the ICT Turtle Soup Setup
The ICT Turtle Soup setup is simple to identify. First, go to a higher timeframe and mark out buyside liquidity and sellside liquidity. These areas will be recent highs/lows, previous day highs/lows, previous week highs/lows, etc. Then, change back to a lower frame to trade on. Once liquidity is swept on the lower timeframe, wait for a market structure shift on the lower timeframe to take your entry.
Bullish Setup
For a bullish ICT Turtle Soup setup, you should mark out sellside liquidity areas on a higher timeframe. Then, on a lower timeframe, look for a sweep of sellside liquidity, followed by a bullish market structure shift.
Bearish Setup
For a bearish ICT Turtle Soup setup, you should mark out buyside liquidity areas on a higher timeframe. Then, on a lower timeframe, look for a sweep of buyside liquidity, followed by a bearish market structure shift.
Types of ICT Turtle Soup Setups
There are two types of ICT Turtle Soup setups: External Range and Internal Range.
An external range ICT Turtle Soup setup occurs when price goes outside of the current market range and reverses towards the opposite end of the range or further.
An internal ICT Turtle Soup setup occurs when the market is already trending in one direction and has a pullback, presenting an opportunity to enter a position alongside the trend.
How to Trade the ICT Turtle Soup
Long Trades: Once a bullish market structure shift occurs, you can take a long entry, setting your stop loss below buyside liquidity and targetting the nearest sellside liquidity from the higher timeframe.
Short Trades: Once a bearish market structure shift occurs, you can take a short entry, setting your stop loss above sellside liquidity and targetting the nearest buyside liquidity from the higher timeframe.
Long Trade Example
In this example, there was a bullish ICT Turtle Soup setup. There was a liquidity sweep of higher timeframe sellside liquidity, followed by a bullish market structure shift. After the MSS forms, you can take a long entry, setting your stop loss below the higher timeframe SSL level and target the nearest higher timeframe buyside liquidity level.
Short Trade Example
In this example, there was a bearish ICT Turtle Soup setup. There was a liquidity sweep of higher timeframe buyside liquidity, followed by a bearish market structure shift. After the MSS forms, you can take a short entry, setting your stop loss above the higher timeframe BSL level and target the nearest higher timeframe sellside liquidity level.
ICT Turtle Soup Indicator
We developed and released an indicator that automates the entire ICT Turtle Soup strategy. The indicator shows you higher timeframe liquidity levels, market structure shifts, buy signals, sell signals, take profit areas, and much more. You can also back test everything with the built-in backtesting dashboard. Try it out for free today on TradingView here.
Do you need to wait for a Market Structure Shift with the ICT Turtle Soup?
No, you don't need to wait for a Market Structure Shift (MSS) to enter a position using the ICT Turtle Soup strategy. Instead, you could wait for price to retrace to a key level such as an Order Block or Fair Value Gap (FVG).
What higher timeframe should you use for the ICT Turtle Soup?
When trading the ICT Turtle Soup strategy, you want to use a higher timeframe to mark out buyside liquidity and sellside liquidity levels. If you're trading on the 15-minute timeframe or less, you should use the 1-hour timeframe to find these levels. If you're trading on the one-hour timeframe, you should use the 4-hour timeframe or higher.
What's the best timeframe to trade the ICT Turtle Soup?
We've found that the ICT Turtle Soup strategy works best for swing traders. Thus, we recommend using the following timeframes: 15-minute, 30-minute, 1-hour.