How To Use TM's Indicators: The Turtle Soup Plus One Lists

In researching the system, TradingMarkets.com CEO and co-founder Larry Connors uncovered some valuable insights which became the Turtle Soup and Turtle Soup Plus One strategies. In studying the methodology, he discovered that the system worked, however, it would experience large drawdowns, so many traders would be blown out of capital before the one big move came. Because of this, he devised a method of taking advantage of the false breakouts, thereby capturing a number of smaller false breakouts and taking profits, rather than watching your money wither away waiting for the home run. This methodology became the Turtle Soup and Turtle Soup Plus One patterns.

The rules of the Turtle Soup pattern are simple (short sell setups are reversed):

1) The futures contract must make a new 20-day low.

2) The previous 20-day low must have occurred at least four trading sessions earlier.

3) After the market falls below the previous 20-day low, place an entry buy stop 5-10 ticks above the prior 20-day low. This buy stop will be good for today only.

4) If the trade is triggered, place an initial good-until-cancelled sell stop one tick under today's low.

The rules for the Turtle Soup Plus One are almost exactly the same as the original Turtle Soup pattern, except the setup occurs one day later. In the nightly Turtle Soup Plus One Buy and Turtle Soup Plus One Sell lists, we provide you with actionable signals of the futures contracts setting up in the pattern, and possibly lining up for at least a short-term reversal. These lists are updated nightly as the setups occur and are easily accessed via the Futures Indicators page. The lists are intended to help you quickly spot the contracts tracing out this pattern, which can then turn into a profitable trade for you.

The Rules for the Turtle Soup Plus One pattern (reverse for sells):

1) The market must make a new 20-day low. The prior 20-day low must have been made at least three trading sessions earlier. The close of the new low (day one) must be at or below the previous 20-day low.

2) An entry buy stop is placed the next day (day two) at the earlier 20-day low. If you are not filled on day two, the trade is cancelled.

3) If the trade is triggered, place a protective stop one tick under the lower of either the day one low or the day two low.

4) These reversal are often short-lived, so take profits within two to six days and trail stops on positions that move in your favor.

Soybean Oil (BOH2 | Quote | Chart | News | PowerRating) appears on the list on Dec. 3 after making a new 20-day high (blue circle). The previous 20-day high was at least three days earlier (red circle). When the contract trades below the high of the prior 20-day high, the trade is triggered, and we place a stop immediately one tick above the high of Dec. 3. Trailing the move down would have resulted in a profitable trade, as the stock staged an intraday reversal.

The lean hog contract appears on the list in mid-October when it makes a new 20-day low (blue circle) and the prior 20-day low was at least three days earlier. It explodes more than 5 points higher out of the pattern.

What this pattern does is identify possible candidates that are testing prior highs and lows, and then fail the test, and reverse. By using the Turtle Soup Plus One buy and sell lists, you can quickly have a few names provided to you, and you can then consult the charts to determine the best opportunities to fit your risk tolerance, as well as your entry and stop points. Using these lists, you should be taking profits out of the futures markets. Best of luck with your trading.

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