How to Time Expansions Using External & Internal SMT | Full Breakdown

Summary

In this video, the presenter explains how to effectively use external and internal SMTs (Smart Money Techniques) in trading to time market entries. By combining higher time frame SMTs with confirmation from lower time frame internal SMTs, traders can avoid false signals and anticipate price movements more accurately. The video highlights the importance of aligning these SMTs with key market cycles and provides practical examples of how to spot and confirm these signals, emphasizing the power of double SMTs in identifying the right time to enter trades and avoid potential traps.

Takeaways

• 😀 SMT (Smart Money Tool) helps identify when large external movements are confirmed on lower time frames, guiding traders on when to enter and exit trades.
• 😀 An 'external' SMT refers to a high time frame signal (e.g., daily), while an 'internal' SMT is based on a smaller time frame that confirms the external move.
• 😀 To confirm a higher time frame SMT, look for an internal SMT, especially at the SMR (Significant Market Range), as it indicates the right time for price expansion.
• 😀 SMT signals, whether external or internal, should be viewed in relation to time cycles, such as daily or 30-minute cycles, which dictate key highs and lows.
• 😀 When an external SMT is present, price action may not always move immediately. It can retrace, forming an internal SMT that confirms the larger external signal.
• 😀 Double SMTs, where both external and internal signals align, are particularly powerful in pinpointing the right time for price to reverse or expand.
• 😀 It's crucial to align SMT signals across correlated assets (e.g., ES with ES for internal and external SMTs) to ensure consistency and reliability of the signals.
• 😀 In practice, wait for an internal SMT confirmation on a lower time frame (e.g., 5-minute or 10-minute) after identifying an external SMT to avoid false signals.
• 😀 The timing of the SMT is key — for example, wait for specific times after major market events (e.g., after 9:30 AM for post-market movements) to avoid manipulation cycles.
• 😀 Understanding SMTs allows for better entries, avoiding sideways price action and identifying significant reversals, especially when major lows or highs are swept.

Q & A

What are external and internal SMTs, and why are they important in trading?

External SMTs refer to the larger, higher time frame market structure shifts (like daily or 90-minute cycles), while internal SMTs are smaller shifts that happen within lower time frames (like 5-minute or 10-minute charts). Internal SMTs are important because they confirm the movement of the external SMT and indicate the precise timing to enter trades.

How do you know when to enter a trade based on external and internal SMTs?

To enter a trade, wait for confirmation from both an external SMT on the higher time frame and an internal SMT on a lower time frame. The internal SMT at key points, like the SMR (Specific Market Range), validates that the external SMT is likely to lead to a meaningful price expansion, signaling the right time to enter.

Why is it necessary to wait for an internal SMT before trading with an external SMT?

An internal SMT confirms that the market will indeed expand in the direction suggested by the external SMT. Without this confirmation, there’s a risk of getting caught in false moves or retracements that could lead to losses.

What does it mean when price forms a 'second sweep' in the context of SMTs?

A 'second sweep' refers to a situation where price revisits a previous low or high, taking out stop orders before forming an internal SMT. This second sweep helps confirm the real market direction and the right time to enter trades, avoiding the trap of early, incorrect entries.

What role does timing play in SMT-based trading strategies?

Timing is crucial because SMTs must form at the right time relative to market cycles. For example, in the morning, a trade may be best placed after the first 10-minute cycle, as the initial move is often a manipulation phase. Understanding the timing of the SMT's formation helps avoid trading during uncertain market conditions.

How can you avoid sideways price action when using SMTs?

By waiting for both the external and internal SMTs to align, traders can avoid getting caught in sideways price action. The internal SMT serves as a confirmation of the external move, ensuring that price is more likely to expand rather than move sideways.

What is the significance of using the same pair for both external and internal SMTs?

Using the same pair for both external and internal SMTs ensures greater consistency in the price movement. For example, if the daily SMT is with ES (E-mini S&P 500), it's preferable to see the internal SMT also with ES, as this alignment improves the likelihood that price will follow the expected direction.

How do you apply SMTs when trading with different time frames, such as 30 minutes and 90 minutes?

When trading different time frames, it's important to identify the external SMT on the higher time frame (e.g., daily or 90 minutes) and then look for the internal SMT on a lower time frame (e.g., 5-minute or 10-minute). The external SMT serves as the larger market signal, while the internal SMT confirms the precise entry point on a smaller scale.

How does an SMT-based strategy help identify the correct levels of support and resistance?

SMTs help identify key levels of support and resistance by signaling where price is likely to reverse. When you spot an external SMT at a key level (e.g., daily low or high), you can use the internal SMT to confirm that the price will reverse from that level, avoiding false breaks.

What can traders do if they don’t see an internal SMT during an expected price move?

If no internal SMT is visible, traders should wait for its formation before entering a trade. Attempting to trade without an internal SMT increases the risk of entering a false breakout or sideways market, as the confirmation for price movement is missing.