Ultimate Smart Money Trading Guide

Summary

This 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

00:00

📈 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.

05:00

📊 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.

10:01

🚀 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.

Keywords

💡Smart Money Concepts

Smart Money Concepts refer to a set of trading strategies that are based on clear criteria for chart analysis, aiming to execute high-risk to reward ratio opportunities with confidence. In the video, these concepts are presented as a way to understand price charts and execute trades without feeling pressured. They are central to the theme of the video, which is about educating viewers on how to trade effectively by identifying market direction, key supply and demand areas, and liquidity zones.

💡Market Direction

Market Direction is a fundamental concept in trading that determines whether the trend is bullish (buyers in control) or bearish (sellers in control). The video emphasizes the importance of identifying market direction as the first step in chart analysis. It explains how to determine if buyers or sellers are in control by observing price action and the formation of demand and supply zones, which is crucial for aligning trades with the controlling side of the market.

💡Market Structure

Market Structure refers to the arrangement of price levels that form during a market trend, including higher highs and lows in an uptrend or lower highs and lows in a downtrend. The video discusses how the market structure holds essential information about the market direction, key supply and demand areas, and potential trading opportunities. It is used to identify significant price levels that can act as support or resistance in the market.

💡Supply and Demand Areas

Supply and Demand Areas are price levels where there is an excess of sell orders (supply) or buy orders (demand), respectively. The video explains how these areas are identified by observing price reactions to certain levels and how they can offer trading opportunities. For instance, when the price touches a previously established demand area, it may bounce back up, indicating a potential buying opportunity.

💡Liquidity Zones

Liquidity Zones are areas in the market where there is a high concentration of trading activity, often due to the presence of stop losses or a large number of market participants. The video describes how smart money traders use these zones to their advantage, aiming to enter trades after the stop losses have been 'swept', which can lead to a shift in the market dynamics.

💡Fair Value Gaps (FVG)

Fair Value Gaps are price gaps that occur when the market moves with imbalance, breaking through previous market structures. In the video, FVGs are highlighted as a key tool for identifying demand levels that are unmitigated until the price taps into them, offering opportunities to follow the dominant trend. They are a significant part of smart money concepts and chart analysis.

💡Change of Character

A 'Change of Character' in the video refers to a situation where the market breaks below a valid demand area or above a valid supply area, indicating that control has shifted from demand to supply or vice versa. This concept is used to signal potential trend reversals and is an important aspect of understanding market dynamics and making informed trading decisions.

💡Order Blocks

Order Blocks are areas of optimized supply and demand that form during sharp market moves with imbalance. The video explains that these blocks are marked by the last candle that created a fair value gap, representing a significant decision point in the market. Order blocks are used in trading setups to identify potential entry and exit points for trades.

💡Liquidity Sweep

A Liquidity Sweep is a trading scenario where the market moves through a key level, often a support or resistance zone, in order to clear out stop losses and gather liquidity. The video describes how smart money traders look for these sweeps as potential entry points after the stop losses have been cleared, indicating a possible continuation of the trend.

💡Trading Setups

Trading Setups are specific conditions or patterns in the market that suggest a potential trading opportunity. The video outlines several smart money trading setups, such as the basic order block entry and the order block entry pattern with a liquidity sweep. These setups are used to guide entry, stop loss, and target placement in trades.

💡Trader Edge Platform

The Trader Edge Platform is mentioned in the video as a tool for backtesting trading strategies and developing new trading concepts. It provides a detailed matrix with vital information such as maximum profit gains, win rate, and draw down, which can help traders refine their strategies and make more informed decisions.

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

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