SMC Secrets EXPOSED With Power Of Three

Summary

In this video, the Power of Three trading setup, a key concept in Smart Money Concepts, is explained in detail. The pattern breaks down price action into three phases: accumulation, manipulation, and distribution. Viewers learn how to identify these phases on charts and enter trades based on a failed breakout or 'fake out.' Real chart examples illustrate how to apply the strategy across different time frames and asset classes, while emphasizing the importance of combining this setup with other Smart Money concepts for higher-quality trades. The video also touches on trading psychology and sticking to a plan for success.

Takeaways

• 😀 The Power of Three trading setup is a pattern that breaks down price action into three phases: Accumulation, Manipulation, and Distribution.
• 😀 In the Accumulation phase, the price consolidates, forming equal highs and lows, gathering stop losses and liquidity.
• 😀 The Manipulation phase occurs when a failed breakout, or fake out, occurs, trapping traders and creating liquidity for a move in the opposite direction.
• 😀 The Distribution phase is when the price sharply moves in the opposite direction after the manipulation phase, completing the Power of Three setup.
• 😀 To enter a trade using the Power of Three pattern, wait for a confirmation of the failed breakout, then enter after the price returns inside the consolidation range.
• 😀 Stop loss should be placed above the swing high during an entry, and targets should be set based on key levels ahead of the price.
• 😀 If the price moves sharply and the initial move is missed, wait for a pullback to enter the trade at a better price with a reasonable risk-to-reward ratio.
• 😀 Combining the Power of Three setup with other smart money concepts, such as higher time frame key levels, can provide additional confirmation and improve trade quality.
• 😀 It's important to test the strategy across different assets (currency pairs, stocks, cryptocurrencies) and in various market conditions to ensure its effectiveness.
• 😀 Understanding the influence of trading sessions on price movement is crucial for identifying key phases of Accumulation, Manipulation, and Distribution.

Q & A

What is the 'Power of Three' trading setup?

The Power of Three is a trading pattern in Smart Money Concepts that breaks down price action into three main phases: accumulation, manipulation, and distribution. These phases help traders identify key price movements for entering trades.

What is the accumulation phase in the Power of Three pattern?

The accumulation phase is a period of consolidation where price lacks a clear trend. During this phase, equal highs and lows are formed, gathering stop losses and liquidity above or below these boundaries. It creates the groundwork for future price movements.

What is the manipulation phase in the Power of Three pattern?

The manipulation phase refers to a failed breakout, also known as a fakeout. In this phase, price breaks out of the consolidation range but quickly returns, trapping traders who entered the market based on the breakout. This helps gather liquidity before a sharp move in the opposite direction.

What is a fakeout and how does it work in price action?

A fakeout occurs when the price breaks below a support level or above a resistance level but quickly returns inside the previous range. This signals a manipulation of market participants, inducing traders to make premature moves before the price reverses sharply in the opposite direction.

How do we identify the distribution phase in the Power of Three pattern?

The distribution phase occurs after the manipulation phase, where the market executes a sharp move in the opposite direction of the earlier manipulation. This phase typically signals a trade opportunity for smart money traders, who aim to enter after the stop-losses have been triggered.

What is the optimal time to enter a trade using the Power of Three pattern?

The best time to enter a trade is after the manipulation phase is confirmed. This happens when the price returns inside the previous consolidation range, signaling the failure of the breakout. Traders should look for a close within this range and set their stop-loss accordingly.

How can the Power of Three pattern be applied to lower time frames?

The Power of Three pattern is flexible and can be used on lower time frames, such as 30-minute or 15-minute charts. The key is to identify the phases of accumulation, manipulation, and distribution on these time frames, while aligning with the broader market trend for more reliable signals.

How does market structure affect entry strategies in the Power of Three pattern?

When a strong market structure is present, such as a trend on a higher time frame, it increases the confidence in entering trades based on the Power of Three pattern. Traders should aim to enter in the direction of the larger trend, using the lower time frame for precise entries after confirming the manipulation phase.

How do liquidity sweeps work in the Power of Three pattern?

A liquidity sweep occurs when price breaks beyond a range to engage stop losses and liquidity. In a bullish setup, liquidity is gathered below the lows, while in a bearish setup, it’s gathered above the highs. This liquidity collection sets up the market for a sharp move in the opposite direction, completing the distribution phase.

How does the trading session affect the Power of Three pattern?

The trading session can influence the behavior of price during the Power of Three pattern. For example, during the Asian session, price may consolidate in a small range, setting up liquidity. When the London session opens, the price may break the consolidation range, triggering the manipulation phase, followed by distribution after the liquidity sweep.