Time & Price Algorithmic Trading: SMT

Summary

In this lecture, the speaker introduces the concept of Smart Money Technique (SMT) for lower time frame protocols. The focus is on validating market maker models using various time cycles, from 3 minutes to yearly. The process involves identifying Smart Money Reversals (SMR), utilizing time cycle SMT, and confirming these patterns with a Change of State Delivery (CSD). The lecture emphasizes that the higher the time cycle, the higher the probability of the market maker model being accurate. Additionally, it discusses how different traders (scalpers, swing traders, and position traders) can apply SMT based on their strategy.

Takeaways

• 😀 SMT (Smart Money Reversal) is used to validate market models by analyzing different time cycles and price movements.
• 😀 The minimum time cycle required for SMT validation is 3 minutes, with larger cycles offering higher probabilities of success.
• 😀 A change in the state of delivery (CSD) is crucial to confirm the validity of a market maker model after SMT is identified.
• 😀 Time cycles like yearly, quarterly, daily, and session cycles are key to analyzing SMT, with 3-minute cycle SMT being the minimum requirement.
• 😀 SMT detects discrepancies between markets, such as one market taking out a low while another does not, validating a market maker model.
• 😀 The SMT detector tool automatically identifies SMT across different time cycles, though it's not required for manual analysis.
• 😀 Session SMT occurs when one market takes out the London high or low while another fails to do so, indicating a reversal in price action.
• 😀 The larger the time cycle, the more reliable the SMT signal; a 90-minute cycle SMT is more significant than a 3-minute cycle SMT.
• 😀 The SMT must be relative to the highest high in a market maker S model or the lowest low in a market maker buy model for validation.
• 😀 Scalpers focus on shorter cycles (3-minute, 10-minute, 30-minute), while swing and position traders focus on longer cycles like daily, weekly, or monthly SMT.

Q & A

What is a Smart Money Reversal (SMT)?

A Smart Money Reversal (SMT) is a concept used in trading to identify key turning points in the market where smart money (large institutional players) may be shifting positions. It is confirmed when there is a discrepancy in price action across different markets, such as one market reaching a low while another fails to do so.

Why are different time cycles important in the SMT strategy?

Different time cycles are important because they help traders identify the strength and validity of an SMT signal. Larger time cycles, such as 30-minute, 90-minute, or daily cycles, provide higher probability for a reversal to hold true, while smaller time cycles (e.g., 3-minute) have lower reliability.

What is the minimum time cycle required for validating an SMT?

The minimum time cycle required to validate an SMT is a 3-minute cycle. This is the smallest time cycle considered reliable enough to confirm a market maker model reversal.

How does the SMT Detector tool assist in trading?

The SMT Detector tool helps automate the identification of SMT signals across multiple time cycles. This tool saves time and effort by detecting SMTs in real-time, allowing traders to focus on the market they are trading without having to manually track multiple markets and timeframes.

How does a change in state of delivery (CSD) impact the SMT validation?

A Change in State of Delivery (CSD) is crucial for confirming the validity of an SMT. CSD occurs after the price reaches a key point of interest and a reversal pattern is identified. Once CSD happens, it confirms that the market maker model (buy or sell) is in play, validating the SMT.

What is the difference between SMTs during the accumulation/distribution phase and those during a reversal?

SMTs during the accumulation or distribution phase simply indicate market activity and do not validate a full market maker model reversal. In contrast, SMTs that occur at the lowest low (for buy models) or highest high (for sell models) within a market maker model confirm a reversal and validate the trade setup.

Why is a 3-minute SMT considered the minimum required cycle?

A 3-minute SMT is considered the minimum because it provides a relatively quick signal that can confirm a market reversal in the context of the larger market flow. Shorter cycles, like 1-minute or tick-based cycles, are less reliable for confirming significant market moves.

How does SMT apply to different types of traders (scalpers, swing traders, position traders)?

Scalpers focus on shorter time cycles (e.g., 3-minute, 10-minute) to capture quick market movements. Swing traders may use 30-minute, 90-minute, or daily cycles to identify trends over a few days or weeks. Position traders, on the other hand, look for longer time cycles such as weekly, monthly, or quarterly SMTs to confirm larger market trends.

What role does the session cycle play in the SMT model?

The session cycle, such as the London or New York trading sessions, is important for confirming SMT signals. For example, during the London session, if one market takes out a high while another does not, it can signal a reversal, validating the market maker model for the session and confirming the trend for the rest of the session.

Can SMT be applied manually, or is it entirely reliant on the SMT Detector tool?

SMT can definitely be applied manually. Traders can analyze price action across multiple time cycles and markets, but the SMT Detector tool simplifies this by automating the process and identifying SMTs across different time cycles without requiring manual tracking and calculation.