Turtle Soup Trading Strategy Rules

What is the turtle soup trading strategy?
And is it worth considering as part of your trading plan?

Turtle Soup

One turtle soup, please waiter… No, not that soup. Funnily enough if you Google turtle soup, that’s exactly what comes up. Wuhan bat soup part II? I better not go there…

Back to trading.

So Turtle Soup is a take on the Turtle Traders strategy made famous by Richard Dennis. In fact, it’s the opposite. The turtle’s strategy was to buy a 20-day breakout on the main futures markets. Traders would add to the positions as the market moved in their favour. The idea was to really try and capitalise on trends and make as much as possible from them.

Only some of the so-called turtles made money, and this was solely down to the fact some of them could not follow rules, they tinkered with the system, and meddled with the strategy… another lesson on why sticking to the rules is the way forward!

But that’s for another day… today turtle soup. Trading strategy rules:

For longs

  • Price must make a new 20-day low
  • The previous 20-day low must have been at least 4 trading sessions earlier (this is to stop you from fighting trends)
  • After price drops under the 20-day low place a buy stop 5-10 ticks above the low (good for one day only, you need to get filled the same day)
  • Your trade stop goes under the current day low

Here’s an example on the Nasdaq:

New 20-day low with the last 20-day low being more than 4 days ago (daily chart)

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Another on the DAX

Zooming into an intraday chart:

The long entry is just above the last 20-day low.
(I used 10pts here). The trade targets are a bit trickier.

  • Some say trail a stop and let the market take you out
  • Others suggest a quick 1 – 2 hour move

 I think you need to assess the daily chart, price action and make a judgment call.

 Turtle soup can be used as a nice structured way to get into a market that’s hunted for liquidity and then reversed. Day trader or swing. Enjoy your soup.