I was having a think about stop hunts, judas swings and turtle soups. I struggled to fully comprehend them from the videos and so I’ve tried to explain them to myself a little more. It’s purely hypothetical and really just random musings I had looking at charts and trying to think of reasons behind what I was seeing. But none the less it’s helped me get my head around some of it and what exactly to look out for so I figured I’d share for fun. Let me know if its complete and utter nonsense.
Anyway i’ll copy and paste from my trade journals “Random thoughts and explanations” section lol.
Stop Hunt Hypothesis:
For the explanation I will use examples of stops placed after buys. Price has been moving upwards and there is a clear low where stops would reasonably be placed.
When buys are stopped out this means that the buying positions are closed which is the same as selling. These stops would in this hypothesis create downwards “momentum” proportional to the buying pressure following that point. How much exactly is unknown.
So as stops are taken out you could expect a small move down beyond that nest of stops.
Evidence of buys:
If true then when price reaches a position where stops would be triggered but fails to react and push downwards further this could hint at money being put into the market with buys. Preventing the sell from the closed buys at the stops from pushing price downwards. This could be seen at these levels with candle wicks entering stop zones then the candle heading back up.
It’s possible that if there are multiple lows near to each other which all hold stops that price could be pushed lower and lower knocking out the nested stops simply from the downward momentum caused by the stop’s being triggered which would push price further and further downwards triggering the next nest of stops and so on. Until there is an area with no further stops in reach.
Professional traders all use stops. Some leave them at break even others bring them further up as price moves. So they shift their stop up with each higher low.
Why does this matter? The lows nearest to price would logically have the most stops resting under them due to traders that entered there and those that moved their stops higher combined. This means that as price breaks these stops then they release more selling pressure than those further away.
Judas and Turtles:
As price has broken down triggering the buy stops selling the pair and the end of the chain reaction is reached or simply no other stops are near; then this is a logical point for professionals to buy as price has been brought lower through stops being triggered rather than an actual change in professional traders position bias. So as the trend resumes its direction they can hop on the move with a decent entry having bought low.