How To Trade Like Smart Money With These Easy Steps!

Summary

In this video, we dive into smart money concepts and how to use them to enter high-quality trades. We break down key elements like market structure, imbalances, liquidity, supply and demand zones, and trade entry and management. With a focus on both higher and lower time frames, we explain how to analyze the market, identify key levels, and execute trades efficiently. The guide is filled with practical examples, showing how combining these concepts leads to successful trading. It’s a comprehensive walkthrough for anyone looking to master smart money trading.

Takeaways

• 😀 Market structure is the foundation of smart money trading, and it helps define the market's direction and trading range.
• 😀 A trend is confirmed when a higher high is followed by another higher high, indicating a bullish trend as long as the price stays above the swing low.
• 😀 Fair value gaps (FVGs) are areas where price moves quickly due to strong buying or selling pressure, and they often act as strong reversal points when revisited.
• 😀 Liquidity zones are areas with high concentrations of stop-losses or pending orders. These levels often attract price action before major moves.
• 😀 Swing highs and lows, as well as equal highs and lows, are key liquidity levels to mark on the chart for potential price reactions.
• 😀 The concept of liquidity pools includes both buy-side (above swing highs) and sell-side (below swing lows) liquidity, which can be swept before price moves in the desired direction.
• 😀 Supply and demand zones are areas where price has moved sharply away, often due to strong buying or selling volume, indicating potential reversal points.
• 😀 Identifying valid supply and demand zones requires considering inefficiency, break of structure, and push distance to gauge their reliability.
• 😀 Backtesting is crucial before trading with real money, and the smart money concepts can be applied across various timeframes and asset classes.
• 😀 By combining market structure, fair value gaps, liquidity zones, and supply/demand zones, traders can effectively enter high-quality trades with better risk-to-reward ratios.

Q & A

What is the main goal of the video?

The goal of the video is to show how to put together different smart money concepts, like market structure, imbalance, liquidity, and supply and demand, to enter high-quality trades. It aims to explain these concepts step by step and how to apply them correctly on a chart.

What is the first step in the smart money trading plan?

The first step is analyzing the market structure. This involves identifying the market direction and defining the trading range by marking the swing highs and lows, as well as spotting key levels.

How do we define a trend using market structure?

A trend is defined when the market forms a 1-2-3 move and breaks above the previous high. If the price breaks above the recent high again, it confirms a trend continuation. This higher high and higher low formation indicates that bulls are in control, and the price is likely to rise again.

What is a fair value gap (FVG) in smart money trading?

A fair value gap (FVG) is a price gap caused by a sudden imbalance between the strength of buyers and sellers. It is identified by a three-candle formation where a gap exists between the wicks of consecutive candles. FVGs indicate an inefficient price movement, and the market often revisits these gaps to restore balance.

Why are fair value gaps important for smart money traders?

Fair value gaps are important because they represent areas where price moved rapidly without much trading, which creates inefficiencies. These areas often act as strong reversal points when price returns to them, giving traders high-probability entry points with lower risk.

What role does liquidity play in smart money trading?

Liquidity levels represent areas where a high concentration of orders, like stop-losses or pending trades, exist. These levels attract price movement, as the market may pull toward these areas to collect liquidity before making a significant move. Identifying liquidity zones helps traders anticipate price action more effectively.

How can swing highs and lows be used to identify liquidity?

Swing highs and swing lows are turning points where three candles form a specific pattern. Swing highs and lows often represent key liquidity levels because many traders place stop-loss orders around these points. These levels act as magnets for price, often pulling the market toward them before making a reversal.

What is the significance of equal highs and lows in liquidity zones?

Equal highs and lows occur when price forms multiple highs or lows at similar levels. These areas often signify accumulation of liquidity, as many retail traders expect a reversal at these points. Smart money traders watch for price to 'sweep' the liquidity before making a move in the opposite direction.

What factors make supply and demand zones reliable for trading?

Reliable supply and demand zones are identified by three key factors: inefficiency (gaps between candles), a break of structure (price moving past key support or resistance), and push distance (how far price moves away from the zone). These factors confirm the strength and reliability of the zone as a potential entry point.

How do you combine multiple smart money concepts for a high-quality trade?

By combining concepts like market structure, fair value gaps, liquidity zones, and supply and demand zones, traders can identify high-quality trade setups. For example, waiting for price to fill a fair value gap, then using liquidity levels to trigger stop-losses, and confirming with supply and demand zones, creates a strong framework for entering a trade with high probability.