SMC Secrets EXPOSED With Power Of Three

Summary

In this video, the concept of the 'Power of Three' trading setup is explored, which is a key pattern in smart money concepts. It breaks down price action into three phases: accumulation, manipulation, and distribution. The video explains how to identify these phases on a chart, with a focus on recognizing failed breakouts (fakeouts) as a signal for potential trades. Practical examples from real charts are analyzed, and viewers are shown how combining this setup with other strategies can lead to higher-quality trades. The importance of adapting to different time frames and trading sessions is also discussed.

Takeaways

• 😀 The Power of Three (AMD) is a trading pattern divided into three phases: accumulation, manipulation, and distribution.
• 😀 The accumulation phase involves consolidation, where the price lacks a clear trend and forms equal highs and lows to gather liquidity.
• 😀 The manipulation phase follows accumulation and refers to a failed breakout, known as a fake out, where smart money sweeps liquidity before moving the price in the opposite direction.
• 😀 The distribution phase is when smart money enters the market after triggering stop-losses and takes the price in the opposite direction of the previous fake out.
• 😀 A valid entry point in the Power of Three occurs when price returns inside the range after a failed breakout, confirming the manipulation phase.
• 😀 For a trade setup, place a stop-loss above the swing high and target levels ahead of the price, considering both the risk-to-reward ratio and market conditions.
• 😀 Missing the initial move? Look for continuation trades after the manipulation phase, which could provide another opportunity to enter the market.
• 😀 Combining the Power of Three setup with other smart money concepts (such as higher time frame supply or demand zones) enhances the validity of the entry.
• 😀 It's essential to evaluate trading strategies across different currency pairs, assets, and market conditions to determine if a setup works for your trading style.
• 😀 Understanding the effects of trading sessions (such as the Asian and London sessions) can help in identifying when consolidation and manipulation phases are likely to occur, providing better timing for trades.

Q & A

What is the Power of Three (AMD) trading pattern?

The Power of Three is a trading pattern that breaks down price action into three major phases: Accumulation, Manipulation, and Distribution. This pattern helps traders identify key market moves and time their trades more effectively.

What happens during the Accumulation phase in the Power of Three?

During the Accumulation phase, the price consolidates within a range, forming equal highs and lows. This phase gathers liquidity above and below the range, as traders place stop-loss orders around these levels.

What is a Manipulation phase, and how does it affect price action?

The Manipulation phase occurs when the price breaks out of the consolidation range but then quickly returns inside, signaling a failed breakout (also known as a fake-out). This traps traders and collects liquidity before the price moves in the opposite direction.

What is the significance of a 'fake-out' in trading?

A fake-out is when the price breaks a key level (such as support or resistance) but quickly returns inside the range. It signals that the breakout was not genuine and is designed to trap traders, setting up for a larger move in the opposite direction.

How does the Distribution phase differ from the previous phases?

The Distribution phase is the final stage where, after liquidity has been gathered, the price makes a sharp move in the opposite direction. This phase represents the ideal point to enter a trade, as smart money traders typically aim to enter after stop-losses have been triggered.

How can a trader confirm the Power of Three setup on a chart?

A trader can confirm the setup by looking for a failed breakout (the Manipulation phase) followed by a price return inside the consolidation range. This confirms that the price was manipulated, and the Distribution phase is likely to follow.

Why is it important to combine the Power of Three with other trading concepts?

Combining the Power of Three with other concepts, like key supply and demand zones or higher time frame analysis, increases the accuracy of the trade. This multi-layered approach provides additional confirmation and reduces the risk of false signals.

How does the Power of Three pattern work across different time frames?

The Power of Three can be applied to both lower and higher time frames. For example, a 30-minute chart might show a quick liquidity sweep, while a higher time frame might provide an overall trend, offering a comprehensive view of market behavior.

What role do trading sessions play in identifying the Power of Three pattern?

Different trading sessions, such as the Asian and London sessions, affect market behavior. The Asian session is often quiet and consolidates, while the London session introduces volatility. The Power of Three pattern can be identified during these periods of manipulation and distribution.

How can a trader use the Power of Three pattern for intraday trading?

For intraday trading, the goal is to catch the largest move within the trading day. A trader would look for the Power of Three pattern during the day, aiming to enter trades after the manipulation phase, typically when the price breaks back into the consolidation range.