TLDR;
This video provides a comprehensive course on Smart Money trading, covering market structure, strong and weak levels, internal and external levels, break of structure, change of character, and entry models like supply and demand zones, fair value gaps, and breaker blocks. It emphasizes understanding market structure and liquidity to identify high-probability trading setups.
- Market structure analysis is crucial for understanding price movements.
- Supply and demand zones, fair value gaps, and breaker blocks are key entry models.
- Combining market structure knowledge with a chosen entry strategy is essential for successful trading.
Intro [0:00]
The video introduces a full course on Smart Money trading, aiming to equip viewers with the knowledge to become profitable traders through patience and practice. The course will cover market structure and various trading strategies.
Market Structure [0:22]
The market moves in three ways: uptrend, downtrend, and sideways. An uptrend is defined by repeatedly breaking highs and maintaining price above the last lows, confirmed after a pullback that doesn't break the previous low. A downtrend repeatedly breaks past lows while holding the price below the last high, characterized by lower lows and lower highs. Sideways markets lack a clear trend, often preceding trend reversals, and are difficult to trade due to unclear order flow.
Strong and Weak Levels [4:20]
Strong levels are price levels that are hard to break, while weak levels are easily broken. In an uptrend, lows are strong levels, and broken highs are weak levels. In a downtrend, highs are strong levels, and broken lows are weak levels.
Internal and External Levels [5:53]
External levels are structural price levels on the high time frame, while internal levels are on the lower time frame. In an uptrend, external levels are major highs and lows, and internal levels are the low time frame structure within the pullbacks. Similarly, in a downtrend, external levels are major highs and lows, and internal levels are the price action within the pullbacks.
Break of Structure [7:17]
The break of structure indicates a continuation of the main trend and liquidation of orders against the trend. In an uptrend, breaking a high is a bullish break of structure, while in a downtrend, breaking a low is a bearish break of structure.
Change of Character [8:15]
The change of character, also known as market structure shift, signals the first indication of a trend reversal. In an uptrend, it occurs when the price breaks the last low, and confirmation happens when the price fails to break the past high and then breaks the lows. In a downtrend, it occurs when the price breaks the last high, and confirmation happens when the price fails to break the past low and then breaks the highs.
Applying Break of Structure and Change of Character [10:34]
The video explains how to apply both break of structure and change of character concepts in both simple and complex market structures, including how to identify internal changes of character within pullbacks. It uses line charts to illustrate these concepts before transitioning to candlestick charts.
Chart Analysis: Break of Structure and Change of Character [18:26]
The video demonstrates how to apply the concepts of break of structure and change of character on a Euro/USD daily chart. It shows how an uptrend can shift to a downtrend after breaking a key low and failing to make new highs. The analysis includes identifying internal changes of character on lower time frames within the pullbacks.
Entry Models: Supply and Demand [20:22]
Supply and demand zones are price levels where smart money is most actively trading. Markets move from balance to imbalance and back to balance. Supply zones are formed after a rally-base-drop or drop-base-drop pattern, while demand zones are formed after a drop-base-rally or rally-base-rally pattern. Traders look for opportunities to sell short at supply zones and buy at demand zones.
Identifying Supply and Demand Zones with Candlesticks [24:34]
To identify supply zones, look for a candle with large volume that breaks the balance to the downside, then mark the high and low of the candle before the aggressive move. For demand zones, find an aggressive move to the upside and mark the high and low of the candle before the move.
Supply and Demand Zones: Chart Examples [26:17]
The video provides examples of identifying supply and demand zones on charts. It shows how price often rejects from these zones, offering trading opportunities. The importance of patience and waiting for the right setup is emphasized.
Combining Market Structure with Supply and Demand [28:53]
Market structure knowledge enhances the use of supply and demand zones. In a downtrend, look for supply zones and wait for an internal bearish change of character after the price hits the supply zone. In an uptrend, look for demand zones and wait for an internal bullish change of character after the price hits the demand zone.
Supply and Demand Zones: Chart Example [32:04]
The video analyzes a GBP/USD chart, identifying an uptrend and valid demand zones. It explains how to wait for price to hit the demand zone and show a bullish reaction before entering a trade. The analysis includes zooming into lower time frames to identify internal changes of character.
Entry Models: Fair Value Gap (FVG) [38:35]
A fair value gap (FVG) occurs when large, sharp movements make the market inefficient. It is a level where the market becomes unfair for one side of participants. Traders use FVGs for entry strategies, anticipating a reaction when the price fills the inefficiency.
Identifying Fair Value Gaps with Candlesticks [40:43]
To identify a bullish FVG, look for a sequence of three candles where the middle candle is large and has higher momentum. The high wick of the first candle should be lower than the body of the large candle, and the low wick of the third candle should be higher than the body of the large candle. For a bearish FVG, the rules are similar but inverted.
Fair Value Gap: Chart Examples [42:07]
The video provides examples of identifying fair value gaps on charts. It emphasizes waiting for market structure to validate the FVG before taking a trade. The video also discusses the risks of trading against the trend using FVGs.
Fair Value Gap: Backtesting Examples [47:07]
The video includes backtesting examples of trading FVGs on both low and high time frames. It highlights the trade-offs between hit rate, quality, and risk-to-reward ratio on different time frames. Low time frames have a high hit rate but low quality, while high time frames have a low hit rate but high quality.
Entry Models: Breaker Block [53:07]
A breaker block is an order block (supply or demand zone) that fails to hold and flips into a new order block for the opposite trend. In an uptrend, a failed demand zone becomes a bearish breaker block, while in a downtrend, a failed supply zone becomes a bullish breaker block.
Breaker Block: Chart Examples [57:21]
The video provides examples of identifying breaker blocks on charts. It shows how a failed supply zone can turn into a bullish breaker block after a change of character. The video emphasizes the importance of understanding market structure and liquidity.
The End [59:10]
The video concludes by summarizing the key concepts covered, emphasizing the importance of understanding market structure and liquidity. It encourages viewers to choose one entry strategy and master it. The video also highlights the importance of discipline and patience in trading.