Ultimate Smart Money Trading Guide
Summary
TLDRThis video delves into smart money trading concepts, offering strategies to identify market direction, key supply and demand zones, and liquidity areas. It outlines the importance of aligning trades with market control and presents top trading models, including order block entries and liquidity sweeps. The tutorial emphasizes the significance of understanding market structure and backtesting strategies for effective trading.
Takeaways
- 📈 Identifying Market Direction: The first step in smart money trading is to determine the trend and which side, buyers or sellers, is in control.
- 🔄 Market Control Shift: When the price mitigates a demand level, demand takes over; conversely, if the price breaks a supply zone, supply takes over.
- 🌐 Market Structure: Understanding the market structure provides insights into key supply and demand areas, liquidity zones, and potential trading opportunities.
- 💧 Demand and Supply Zones: Demand zones act as support when unmitigated, while supply zones offer resistance and potential selling opportunities.
- 🚫 Change of Character: A break below a valid demand area indicates supply has taken control and a potential reversal is signaled.
- 🔄 Consolidation and Ranging Market: A period of consolidation may occur between supply and demand zones, indicating a battle for control.
- 🛡 Preparation for Market Scenarios: Traders cannot control the market but can prepare for various scenarios based on market action.
- 🔑 Market Structure and Liquidity: Liquidity areas are often determined through market structure, and vice versa.
- 💹 Liquidity Zones: These are areas where retail traders are active, and smart money traders look to enter after stop losses have been swept.
- 📊 Smart Money Trading Models: The video outlines top models combining market structure and liquidity for effective trading strategies.
- 📝 Backtesting and Strategy Adjustment: The importance of backtesting trading strategies and adjusting them to fit individual trading plans is emphasized.
Q & A
What are smart money concepts in trading?
-Smart money concepts in trading refer to a set of strategies that provide clear criteria for chart analysis, making it easier to understand price charts and execute high-risk to reward ratio opportunities with less pressure.
What is the first step in analyzing a price chart according to the video?
-The first step in analyzing a price chart is to identify the market direction, which involves determining the trend and figuring out if buyers or sellers are in control.
How does the system work when the price mitigates a demand level?
-When the price mitigates a demand level, demand takes control over supply. This can create a demand zone that remains unmitigated until the price taps into it, offering an opportunity to follow the dominant trend.
What is a change of character in the context of smart money trading?
-A change of character indicates that supply has taken control over demand and a valid supply area has been established. It usually occurs when the price breaks below a valid demand area.
What is a fair value gap (FVG) and why is it important in smart money concepts?
-A fair value gap (FVG) is the imbalance between buyers and sellers identified through price action. It is important in smart money concepts because it helps in identifying demand levels that were created during an uptrend and can be used for analysis and trading decisions.
What is the significance of market structure in smart money trading?
-Market structure holds essential information such as market direction, key supply and demand areas, liquidity zones, and potential trading opportunities. It is crucial for understanding the overall market sentiment and identifying high-quality trading setups.
What are liquidity zones in smart money trading?
-Liquidity zones are areas where retail traders get involved in the market, often resulting in multiple rejections. These areas are significant for smart money traders as they aim to enter trades after stop losses have been swept, taking advantage of the imbalance created by retail trader activity.
How can smart money traders use the concept of a basic liquidity sweep through a major market structure level?
-Smart money traders can use the concept of a basic liquidity sweep by identifying key support or resistance levels that have been rejected multiple times. They look for opportunities to enter trades after the stop losses of retail traders have been swept, taking advantage of the market imbalance.
What are the key points to consider when using the order block trading setup?
-Key points include trading with the market direction, checking higher time frame key levels before trading, and analyzing the left side of the structure to avoid low-quality trades. It's also important to ensure the order block is fresh and has obvious inefficiency and fair value gaps.
What is the order block entry pattern accompanied by a liquidity sweep, and how is it used in trading?
-The order block entry pattern accompanied by a liquidity sweep involves identifying a scenario where the market breaks the structure but has no inefficiency on the left side. Traders look for inefficiencies just below the swing low and a valid order block zone, placing buy orders above the order block zone and targeting the next level in front of the price.
Can you explain the 'order block in order block' trading strategy mentioned in the video?
-The 'order block in order block' trading strategy involves using two time frames. Traders first analyze the market direction and structure on a higher time frame and mark the order block zone. They then wait for the price to return to the order block and look for a change of character formation on a lower time frame to confirm the entry. The strategy uses either a change of character with inefficiency and order block or a Fibonacci retracement when there is no inefficiency or order block.
Outlines
📈 Introduction to Smart Money Trading Concepts
This paragraph introduces the concept of smart money trading, emphasizing its advantages over other trading styles due to clear criteria for chart analysis. It outlines the importance of understanding market direction, market structure, supply and demand areas, and liquidity zones. The video promises to explain basic smart money concepts and top trading models, encouraging viewers to like and subscribe for more advanced trading content. The paragraph also explains how to identify market direction by observing price action and the control between buyers and sellers, using the concept of demand and supply zones to determine market control and potential trading opportunities.
📊 Smart Money Market Structure and Liquidity Zones
The second paragraph delves into the smart money market structure, highlighting its significance in identifying key supply and demand areas, liquidity zones, and potential trading opportunities. It discusses the creation of demand levels during uptrends and the concept of fair value gaps, which are crucial for chart analysis. The paragraph also addresses the importance of reacting to major market structure levels and the role of liquidity areas where retail traders are involved. It introduces trading models that combine market structure and liquidity, such as the basic liquidity sweep and order block entry, providing examples and explaining the importance of entering trades after stop losses have been cleared by the market.
🚀 Advanced Smart Money Trading Setups
The final paragraph presents three advanced smart money trading setups, providing step-by-step instructions on how to enter the market, set stops, and targets. It emphasizes the importance of trading with the market direction and checking higher time frame key levels before trading. The paragraph explains the order block entry strategy, the order block entry pattern with a liquidity sweep, and the order block in order block trading strategy. Each strategy is detailed with specific rules and considerations, such as trading when the market direction is clear, assessing higher time frame levels, and analyzing the left side of the structure to avoid poor trades. The video concludes by encouraging viewers to backtest and adjust the strategies to fit their trading plan and style, and mentions the Trader Edge platform for backtesting and developing new trading concepts.
Mindmap
Keywords
💡Smart Money Concepts
💡Market Direction
💡Market Structure
💡Supply and Demand Areas
💡Liquidity Zones
💡Fair Value Gaps (FVG)
💡Change of Character
💡Order Blocks
💡Liquidity Sweep
💡Trading Setups
💡Trader Edge Platform
Highlights
Introduction to smart money concepts and their advantages in trading.
Explanation of basic smart money concepts for chart analysis and trade execution.
Importance of identifying market direction and determining control between buyers and sellers.
How the system operates on mitigations to identify control shifts between supply and demand.
Formation of demand and supply zones in an uptrend and their significance in following the dominant trend.
Understanding the implications of a change of character in market structure indicating control shift.
Analysis of market sentiment and the role of demand levels in supporting bullish trends.
Identification of potential selling opportunities in a downward market controlled by supply.
Importance of observing price action to determine market direction at unmitigated demand areas.
Preparation for different market scenarios despite the inability to control market outcomes.
Market structure analysis revealing key supply and demand areas, liquidity zones, and trading opportunities.
Concept of fair value gaps and their role in identifying market imbalances and demand levels.
Link between market structure and liquidity zones in smart money concepts.
Role of liquidity areas in attracting retail traders and the smart money strategy to exploit stop losses.
Introduction to powerful trading models combining market structure and liquidity.
Description of a basic liquidity sweep model through a major market structure level.
Analysis of a liquidity model involving an order block and potential long position opportunities.
Fundamentals of general chart analysis and identification of market direction and key levels.
Three best smart money trading setups explained with entry, stop, and target rules.
Use of the Trader Edge platform for backtesting and developing new trading concepts.
Detailed explanation of the order block entry strategy and its alignment with market conditions.
Combining order blocks with liquidity sweeps for trading opportunities in uptrends.
Order block in order block trading strategy using two time frames for trade execution.
Conclusion summarizing the value of the video and encouraging viewer engagement.
Transcripts
hey guys and welcome to another
episode smart money Concepts offer many
advantages over other trading styles by
providing clear criteria for chart
analysis it makes it easy to understand
any price chart and execute high risk to
reward ratio opportunities without
feeling
pressured in this video we will first
explain the basic smart money Concepts
that you need to apply on the chart
before making any trades this includes
identifying Market Direction
understanding Market structure finding
the best supply and demand areas for
trading and recognizing liquidity zones
also we will provide a step-by-step
explanation of the top smart money
trading models that every Trader should
know so guys if this is something that
interests you make sure to hit the like
button to show your support and
subscribe to our Channel if you're new
since we publish many Advanced trading
Concepts
[Music]
let's start with the basic concepts and
fundamentals identifying the market
Direction Supply or demand who is in
control identifying the market direction
is generally the first step in analyzing
a price chart we want to identify the
trend and determine if the buyers or
sellers are in control we always aim to
trade a l igned with the controlling
side of the
market how does the system
work the system operates on mitigations
when the price mitigates a demand level
demand takes control over Supply
conversely when the price mitigates a
supply Zone Supply takes control over
demand imagine the prices moving in an
uptrend creating a series of higher
highs and higher lows each time the
price breaks the structure to the upside
Within efficiency a demand zone is
formed these demand zones remain
unmitigated until the price Taps into
them offering a perfect opportunity to
follow the dominant Trend however if the
price breaks below a valid demand area
this is called a change of character
indicating two things first supply has
taken control over demand second a valid
Supply area has been
established the price then continues to
move downward forming Supply areas until
it reaches the next unmitigated demand
area at this point there is a battle
between supply and demand sometimes we
see a period of consolidation and a
ranging Market between these two zones
breaking either Zone indicates who takes
control here we have one two and three
moves that break above the previous
Market structure indicating that demand
is in control we have an unmitigated
demand area which will act as support
when the price returns to this
level one once more we have a temporary
correction and the price breaks the high
with imbalance creating a strong demand
area again still the market sentiment is
bullish as long as the price trades
above the extreme
demand now we can see that the market
has tested the demand level and failed
to create a new higher high due to a
lack of buyer strength after breaking
below the low point we can conclude that
the buyers are no longer in control and
we might witness a reversal if we
consider this point as the start of the
impulsive move that caused the market
structure shift here would be our supply
area continuously the market breaks the
structures to the downside showing that
the supply is in control creating
multiple Supply areas each of these
Supply areas could be a potential
selling opportunity until we reach this
unmitigated demand area in front of the
price this Zone can be a potential
interest area for the buyers to step
into the market so at this point we have
a battle between the buyers and sellers
therefore we must wait and observe the
further price action to determine the
market Direction because this level can
be a turning point for the price or we
might at least witness a temporary
correction now here is an important
point we cannot control the market
however we can prepare ourselves for the
different scenarios that might happen
let's move on to the next topic smart
money market
structure the market structure structure
holds essential information Market
Direction key supply and demand areas
liquidity zones and potential trading
opportunities let me show you some basic
concepts about the smart money market
structure in an ideal uptrend the market
continuously makes higher highs and
higher lows every time Market breaks a
structure to the upside with imbalance a
demand level is automatically created
the imbalance between the buyers and
sellers are identified through
witnessing the fair value gaps in price
action the demand levels that created
fvg are super important and consist main
part of chart analysis and smart money
Concepts as long as we stay above this
Zone the demand is in control and the
market sentiment is bullish but if we
get a break and close below this level
we call that a change of character that
signals a possible reversal with all
being said the levels that created the
fair value gaps and break of structures
consist our Major Market structure
levels and reacting to them convey lots
of information
the same concept applies to the bearish
scenario keep in mind that the market
structure and liquidity zones are two
Inseparable Concepts in smart money
Concepts many liquidity areas Find
meaning through Market structure and
many Market structure levels become
meaningless with liquidity
Concepts liquidity areas are where
retail Traders get involved in the
market we know that multiple rejections
are interesting entry levels for
traditional Traders so there are many
stop losses and liquidities are gathered
blow them smart money aims to sweep all
of the retail Traders stop losses and we
want to enter the trade after stop
losses have been
swept now let us show you some of the
most powerful models which combines the
market structure and liquidity on the
chart the first model is a basic
liquidity sweep through a major Market
structure level here on the gold
30-minute chart we have a clear uptrend
we have a recent level of support which
has been rejected by the market multiple
times when the price approaches this
level price action Traders will go long
anticipating a rejection from this key
Zone on the other hand traders who
previously entered long Position will
support their positions so this area is
considered a key liquidity level and
stop loss are gathered somewhere below
this
area now the question is where can be a
point of Interest as smart money Trader
if we look to the Le hand side we can
notice this area of a fair value gap
which is an extreme demand
Zone this is our point of interest and
we can look for buying opportunities so
as a smart money Trader we want to get
involved in the market after the stop
losses have been swept a perfect of
combination of Market structure and
liquidity Concepts on the
chart now let's see the second liquidity
model here we have a valid order block
and a potential trading opportunity to
go long but looking at the left side we
can spot this gap between the candles
precisely below the first order block
and another valid order block Zone here
now this Gap will act as a magnet for
the price to come and fill it restore
the balance grab the liquidity below the
first order block and continue pushing
upwards when it mitigates the second
one so here are two points first before
placing any trades you should look at
the left side to see what you have to
avoid this kind of unnecessary risk
second when this pattern is formed and
we have a gap and another valid order
block precisely under the first one we
don't consider this break a valid change
of character since there is a high for
this move to be just a liquidity grab
and does not necessarily mean a reversal
is
coming now that we have discussed the
fundamentals required for General chart
analysis and how to identify the market
Direction key levels and potential
trading opportunities let me explain
three of the best smart money trading
setups step by step with all the rules
in this part we will teach you how to
enter the market and set your stops and
targets however feel free to back test
and adjust these strategies to suit your
trading plan and style we also do plenty
of back tests using the trader Edge
platform to develop new trading
Concepts this platform helps us to save
time and energy Trader Edge provides a
detailed Matrix that includes Vital
Information like maximum profit gains
win rate draw down and more once we are
are done with the back testing so if you
want a 7-Day free trial check the link
in the
description let's start with the basic
order block
entry order blocks are optimized supply
and demand
areas they form whenever we have sharp
moves with imbalance breaking the
previous Market structure usually we
Mark the last candle that created the
fair value Gap as an order block which
we believe that the decisions are made
during this candle
the order block trading setup is very
simple and effective in this setup we
use a basic order block entry when it is
aligned with certain market conditions
in the first step we look for a valid
and fresh order block that the market
has recently created a valid order block
must have obvious inefficiency and fair
value gaps between the Wicks breaking
the market structure then we simply
place a buying order a spread size above
the order block Zone and place our stop
below the swing
low we will close half of our position
when the price has reached two times our
risk this way even if the price drops
and hits our stop loss we are at break
even for the second target we will aim
for the next key level in front of the
price to make this strategy more
effective and profitable consider the
following key points trade with the
market
Direction this strategy works best as a
trend continuation setup always trade
when the market direction is clear and
the controlling side is identified
trading with the the dominant Trend
increases your chances of success and
reduce the risk of getting trapped on
the wrong
side check higher time frame key
levels before trading assess the higher
time frame key levels and how much room
the price has before reaching them a
small reaction at a higher time frame
key level can indicate a major Direction
Change in lower time frames when the
price mitigates a higher time frame key
level there is a higher chance of a
temporary reversal always verify the
higher time frames to gauge the distance
to Key
levels analyze the left side of the
structure before placing any trades
examine the left side of the structure
to avoid lowquality trades for instance
if the order block is positioned in a
liquidity zone or if there are gaps and
another order block just below the risk
of a liquidity grab
increases the second trading strategy is
an order block entry pattern accompanied
by a liquidity sweep
imagine we are in an uptrend and the
latest move breaks the market structure
to the upside but has no inefficiency on
the left side we notice inefficiency
just below the swing low and a valid
order block Zone in this scenario
there's a higher chance for the price to
break below the swing low grab the
liquidity and continue pushing up when
it Taps into the order block demand area
when this pattern forms we place our buy
order a spread size above the order
block Zone and Target the next level in
front of the price our stop will be
below the swing low with the entry based
on combining order blocks and a
liquidity sweep below a minor demand
area the same concept is applied to the
bearish
scenario the third trading setup is
called the order Block in order block
trading
strategy we use two time frames to
execute our trades based on this setup
in the first step we analyze the market
Direction and structure then Mark our
higher time frame order block Zone next
we wait for the price to return to the
order block zoom into lower time frames
and look for a change of character
formation to confirm our entry if there
is no change of character we do not
trade the change of character indicates
that the short-term downtrend is over
and the market may start moving to the
upside there are two common scenarios
for entering
trades change of character with
inefficiency and Order
block when the change of character is
accompanied by inefficiency and creates
another order block we place our by
limit a spread size above the order
block and set our stop below the swing
low in this setup we track our profit by
repositioning our stop below the higher
low every time the market breaks a
structure to the upside this technique
allows us to maximize profits if the
market moves in our predicted Direction
without any
pressure change of character without
inefficiency or order block when the
change of character creates no
inefficiency and no order block we we
use Fibonacci retracement levels to
enter the market we apply the
retracement tool from the start to the
end of the change of character move and
place our buy position between the
61.8% and 78.6% retracement levels this
trading strategy is not limited to any
specific time frames however your entry
time frame should be at least two times
lower than your higher time
frame so guys that is it for this video
I hope this video had some value for you
if it had please smash the like button
for me and subscribe to our Channel if
you're new see you guys in the next
episodes
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