Peculiarities of the popular strategy
Those who make decisions are responsible for them. A decision to open a trade is a prerogative of a trader, who needs to take account of market professionals’ and the crowd’s behaviours. Many traders prefer waiting for a trading day to close. Thus, the traders who use the Turtle soup strategy have some time for thinking a trade over. A trade is carried over to the next trading day and this updated strategy is called “Turtle soup + 1”.
The author of this strategy is Linda Raschke. She singled out the following conditions necessary for forming a trading system:
– the market falls to a 20-bar bottom;
– the previous 20-bar bottom must have formed at least 3 trading sessions earlier (for the daily chart).
If these conditions are met, a trader can
– place a pending order to buy at the previous 20-bar bottom’s minimum on the second day following the formation of a new 20-bar bottom;
– place a protective stop order at the new 20-bar bottom’s minimum or at the next day’s minimum, depending on which of them is lower, if the pending buy order has worked;
– fix a part of profits in 2-6 trading days and use a floating stop order to control the rest of the position.
The necessary conditions were met for USD/JPY on the daily chart in early May: a 20-bar minimum formed and the previous 20-bar minimum had formed 5 days earlier. A trader waits for a trading day to close and places a pending order to buy on the day following the formation of the new 20-bar minimum. The activation of the pending order allows placing a stop order at the minimum level minus a few points and watching a market reversal. A part of the position is closed and the market grows by 4.5 figures afterwards.
Turtle Soup + 1 strategy on the daily chart of USD/JPY
Having some time in reserve, a trader can analyse the situation on different time frames. For example, RSI moved to the oversold zone on the H1 chart of USD/JPY, which may be a confirming signal of a correction or a reversal of a bearish trend.
Turtle Soup + 1 strategy on USD/JPY’s H1 chart
The same conditions apply to a bullish Forex market and an ascending trend:
– the market grows to a 20-bar peak;
– the previous 20-bar peak must have formed at least 3 trading sessions earlier.
– a pending order to sell is placed at the previous 20-bar peak’s maximum on the second day following the formation of a new 20-bar peak;
– place a protective stop order at the new 20-bar peak’s maximum or at the next day’s maximum, depending on which of them is higher, if the pending order has worked;
– fix a part of profits in 2-6 trading days;
– use a floating stop order to control the rest of the position.
A good example is the situation which occurred on the USD/CAD chart. The distance between the new and the previous 20-day maximums is 8 bars. A position gets opened on the day following the pattern formation.
Turtle Soup + 1 strategy on the daily USD/CAD chart
With some time in reserve, a trader can switch to a smaller time frame and see a clear MACD divergence, which is an important reversal signal in technical analysis.
Turtle Soup + 1 strategy on the H1 USD/CAD chart
I think the Turtle Soup + 1 strategy is more interesting than Turtle Soup. It doesn’t require an instant reaction and a trader has some time to think a trade over. On the other hand, a trader may miss out on a trade while waiting for the second bar – the one which follows the 20-day extremum – to form.
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Price chart of USDJPY in real time mode
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