Mastering Advanced Smart Money Trading Strategies: Top 3 Techniques Revealed

Welcome to Another Episode of Smart Risk: Advanced Tutorial on Smart Money Concepts

Welcome to another episode of Smart Risk! In this episode, we will delve into advanced tutorial on smart money concepts, which is a trading system that follows the forces with the ability to push the market. We will explain the concepts of demand and supply, market structure, and liquidity from the smart money trading perspective. Additionally, we will cover a complete trading plan including three of the best smart money trading strategies known as sniper entries. If learning advanced trading concepts, strategies, entry reasons, and how to stay disciplined with a trading plan interests you, then subscribe to our channel and enjoy advanced trading content. Now, let’s dive into the world of smart money trading!

Understanding Supply and Demand

Supply and demand are crucial concepts in smart money trading. Supply or demand zones are areas where price rapidly pushes away, creating inefficiency and a break of structure or change of character. When identifying supply and demand areas for trading, there are three factors to consider: inefficiency, break of structure or change of character, and liquidity.

Inefficiency occurs when there are gaps between the candles, and when it happens, price is more likely to come back to this area to fill the gap. Break of structure is formed in a trend continuation every time price breaks a structure level in the same trend direction, signaling a trend continuation. On the contrary, when price breaks a structure level in the opposite direction, it is called a change of character, signaling a possible trend change. Supply and demand zones are most effective when they break through two or more supply and demand zones. Change of character forms after a higher time frame mitigation, where price impulsively breaks through the zones with a few large candles.

Liquidity is an important aspect of smart money trading. If smart money wants to buy a large number of currency pairs, they will need sellers in the market. The existing conditions to place these positions are called liquidity. Liquidity zones are further confirmations to execute a perfect trade. When formed above or below a trading zone, equal highs and lows define liquidity. Stop losses define liquidity, as where the stops exist, the liquidity also exists.

Understanding Order Blocks and Market Structure

Order blocks are optimized supply and demand zones. The last recent candle that created inefficiency is considered an order block zone, regardless of being bearish or bullish. There are three rules for a valid order block: it must have inefficiency, it should lead to a break of structure or a change of character, and it must be unmitigated. Unmitigated means that it has not been tested by the price yet, as order blocks are one-time use.

Market structure is crucial in determining who is in control – supply or demand. Analyzing the market structure in higher time frames helps to find market direction and who is in control. For example, if the price reaches a demand zone in a one-hour structure, it would be wise to look for buying opportunities. However, if the price came from an unmitigated four-hour supply zone, supply is in control, and trading demand without confirmation is not advisable. Analyzing the market structure helps to establish the controlling side of the market and make informed trading decisions.

Three Best Smart Money Trading Strategies

Now that we understand the concepts of smart money trading, let’s explore three of the best entry strategies: supply or demand flip, change of character, and continuation.

1. Supply or Demand Flip: In this pattern, price creates a new high and tests the last demand zone, but fails to create a new higher high. Instead, it breaks through the last demand zone with an impulsive move, leaving a supply zone behind. When the price retests the supply level, it is an opportunity to open a position.

2. Change of Character: This pattern forms after mitigating a higher time frame supply or demand. It is important to trade this pattern only if the market is in our direction in higher time frames. After mitigating the supply zone, the short-term trend changes character with inefficiency, leaving a perfect supply zone. When the price gets back to this level, it is an opportunity to execute short entries.

3. Continuation: This pattern is suitable for clear trending markets. Every time the market makes a valid order block, it is an opportunity to place a trade if both higher and lower time frame directions are in our favor. However, it is important to manage risk carefully and exercise patience while trading this pattern.

Developing a Smart Money Trading Plan

To effectively execute the smart money trading strategies, it is essential to develop a trading plan. Here are the steps to create a smart money trading plan:

1. Choose a Pair and Session: Select one pair to trade and focus on one session. London and New York sessions are the best choices. Master the chosen pair by backtesting it extensively.

2. Analyze Market Structure: Analyze the market structure in higher time frames to find market direction and optimal supply and demand zones or order blocks.

3. Observe Lower Time Frames: Observe lower time frames to execute trades based on the three entry patterns discussed earlier.

4. Manage Risk: Implement proper risk management techniques to protect your capital and maximize profits. Set stop losses and adjust them as the market progresses.

5. Track Profit: Continuously track your profits and adjust your stop loss to secure some of your profits as the market makes new order blocks.

Remember, patience and discipline are key to success in smart money trading. Stick to your trading plan and avoid overtrading.

Frequently Asked Questions (FAQs)

Q: What is smart money trading?

Smart money trading is a trading system that follows the forces with the ability to push the market. It involves analyzing supply and demand, market structure, and liquidity to make informed trading decisions.

Q: How do supply and demand zones work in smart money trading?

Supply and demand zones are areas where price rapidly pushes away, creating inefficiency and a break of structure or change of character. These zones are most effective when they break through two or more supply and demand zones.

Q: What is liquidity in smart money trading?

Liquidity refers to the existing conditions in the market that allow smart money to place their positions. It is important for smart money to have enough sellers or buyers in the market to execute their trades effectively.

Q: How do order blocks work in smart money trading?

Order blocks are optimized supply and demand zones. They are formed when there is inefficiency, a break of structure or change of character, and they have not been tested by the price yet. Order blocks are one-time use and provide opportunities for trading.

Q: How can I develop a smart money trading plan?

To develop a smart money trading plan, choose a pair and session to trade, analyze the market structure in higher time frames, observe lower time frames to execute trades based on entry patterns, manage risk effectively, and track profits by adjusting stop losses.

Conclusion

Smart money trading is a powerful trading system that requires a deep understanding of supply and demand, market structure, and liquidity. By applying the concepts correctly and following the three best entry strategies, traders can increase their chances of success in the market. Developing a smart money trading plan and practicing patience and discipline are essential for long-term profitability. So, subscribe to our channel and stay tuned for more advanced trading content. Happy trading!