TLDR;
This YouTube video provides a comprehensive course on Smart Money Concepts (SMC), explaining how large institutions manipulate markets and how retail traders can identify and capitalize on these manipulations. The course covers market structure, liquidity, fair value gaps, order flow, order blocks, and institutional trading strategies.
- The course aims to provide a solid foundation in SMC, enabling traders to plan entries, stop-losses, and targets effectively.
- It emphasizes understanding market manipulation by big institutions and using retail liquidity against them.
- The course covers various concepts like liquidity, fair value gaps, order flow, and order blocks, providing a structured approach to learning SMC.
Introduction to Smart Money Concepts [0:05]
The video introduces a complete course on Smart Money Concepts (SMC), designed for beginners to advanced learners. The course aims to provide a comprehensive understanding of SMC principles and strategies, focusing on high reward-to-risk ratios. It explains that SMC involves understanding how large institutions manipulate the market, using retail orders to generate liquidity for buying at discounts and selling at premiums. The course is free and aims to provide genuine content for retail traders.
Wyckoff Theory and Smart Money [3:37]
The video credits Wyckoff theory as the foundation of Smart Money Concepts, noting its premise that markets are manipulated by a small group of traders with the ability to influence market movements. These institutions use data about retail orders and behavior to accumulate or distribute assets, trapping retail liquidity. The video also mentions improvements to the theory by inner circle traders like Tom Williams and Steve Morrow, urging viewers not to spend money on expensive courses as the series will be sufficient.
Why Learn Smart Money Concepts? [5:27]
The video explains the necessity for retail traders to learn Smart Money Concepts to avoid becoming the liquidity that big institutions hunt. Understanding how price movements are triggered helps traders track and capitalize on liquidity, enabling them to think differently and view charts with a broader perspective. The concepts can be applied to markets with ample liquidity, such as indices, Forex, and crypto markets.
Best Markets and Time Frames for SMC [6:42]
The video discusses the best markets to trade using Smart Money Concepts, recommending markets with high liquidity such as Forex, crypto, indices, and top Nifty50 stocks. It advises beginners to avoid mid and small caps due to less smooth price action. The video also emphasizes using a top-down approach for time frame analysis, starting from higher time frames to identify the larger market trend and moving down to lower time frames for entries, stop-loss, and targets.
Course Structure [11:03]
The video outlines the course structure, which includes in-depth coverage of important Smart Money Concepts, application of these concepts for trading in live markets, risk management strategies, and the use of an indicator to simplify chart analysis. The course aims to provide a comprehensive understanding of SMC, enabling traders to plan high-probability, high reward-to-risk trades.
Understanding Market Structure in Smart Money Concepts [14:47]
The video introduces the idea of market structure within Smart Money Concepts, explaining that it involves identifying market behavior to plan trades based on the dominant market direction. It highlights the importance of understanding major and minor market structures, as well as the nature of pullbacks for both. The video emphasizes that markets move in waves, with impulse and corrective moves, and that identifying the major structure is crucial for successful trading.
Bullish Market Structure [18:20]
The video describes a bullish market structure as an uptrend with specific constraints, requiring higher highs and higher lows. It explains the concept of "break of structure" (BOS) and how it confirms the continuation of the major trend. A bullish BOS happens when the price breaks and closes above the previous swing high. The video also discusses how to confirm a higher high, noting that price rarely moves in a straight line and often involves counter-trend moves or inducements.
Change of Character and Bearish Market Structure [26:06]
The video explains that a "change of character" (CHoCH) occurs when the market fails to make a new higher high and instead breaks and closes below the previous higher low, signaling a potential shift from bullish to bearish. In a downtrend, the price forms lower highs and lower lows, and to confirm a lower low, the price must do a deeper pullback, taking out the liquidity of the previous internal swing high levels. The video also discusses the importance of deeper pullbacks for searching retailer liquidity.
Strong and Weak Highs and Lows [33:51]
The video defines weak highs and lows as swing points with a greater possibility of getting swept, while strong highs and lows are price levels not easily taken down by the market. It also mentions equal highs and equal lows, noting that their significance will be understood as the course progresses. The video concludes by emphasizing that market structure is the backbone of the market and essential for understanding and trading successfully.
Fair Value Gaps and Market Inefficiencies [36:20]
The video introduces fair value gaps (FVG) and market inefficiencies, explaining that these imbalances occur due to irregular or disproportionate price movements. It briefly explains gaps, volume imbalances, and price spikes as types of imbalances, but focuses on imbalances caused by displacements. Displacement is a powerful move in price action resulting in strong selling or buying pressure, often occurring after a liquidity level has been breached.
Identifying Fair Value Gaps [44:05]
The video provides a simple method to identify a fair value gap as a three-candlestick pattern where the first candle's low does not overlap with the third candle's high in a down move, or the first candle's high does not overlap with the third candle's low in an up move. The middle candle should be a large-bodied candle with little or no wicks. The video also discusses tricky situations and exceptions to this rule, emphasizing the importance of checking if previous candles' highs and lows are broken.
CBs and BCs, Why Market Imbalances Occur [52:00]
The video explains cell-side imbalance buy-side inefficiency (CB) and buy-side imbalance sell-side inefficiency (BC), which are bearish and bullish fair value gaps, respectively. It also discusses why market imbalances occur, noting that they often result from institutions accumulating positions after economic or geopolitical news. The video explains that imbalances represent price inefficiency, and the market will almost always come back to fill them.
How Traders Can Benefit from Market Imbalances [55:08]
The video explains how traders can benefit from market imbalances, viewing them as inefficiencies in price behavior that indicate institutional involvement. Imbalances represent trading opportunities for both intraday and swing traders, helping to identify zones of interest for potential trades. The video also discusses advanced concepts regarding fair value gaps, such as the start of the fair value gap, the consequent encroachment (50% of the fair value gap), and where the price completely fills the fair value gap.
Fair Value Gap Inversion [1:02:06]
The video introduces fair value gap inversion, which happens when a fair value gap fails or when the price closes through it, and then this fair value gap can be used as a support or resistance for future price movements. The video provides examples to illustrate this concept, showing how old CBs can act as support and old BCs can act as resistance. The video concludes by noting that imbalances create fuel for price movement, but traders should use strong confluences and monitor the context before entering a trade.
Introduction to Liquidity [1:04:28]
The video introduces the concept of liquidity, explaining that it is essential for understanding how the market functions and avoiding smart money traps. It defines liquidity as an area where there are stop losses and pending orders waiting to be filled, and notes that big price moves result from smart money trapping uninformed traders. The video emphasizes that if you don't know where the liquidity is, then you are the liquidity.
Understanding Liquidity Zones [1:09:55]
The video explains how to find liquidity zones, differentiating between buy-side and sell-side liquidity. Buy-side liquidity represents a level where short sellers have their stop-loss positioned, while sell-side liquidity represents a level where long buyers have their stop losses. These levels are often found at or near extremes, such as tops and bottoms of ranges, trend lines, double tops, and double bottoms.
Importance of Liquidity [1:12:07]
The video emphasizes the importance of liquidity, noting that it is the direction in which the price moves. Big players aim for the best prices but face challenges finding sufficient counter orders to fill their large orders. Entering at high liquidity areas ensures a better average price for institutional positions. The video also discusses liquidity grab or liquidity sweep, which is the concept of absorbing retail orders by taking advantage of available liquidity at multiple price levels.
External Liquidity [1:15:25]
The video touches upon the different types of liquidity areas within the market structure, classifying them into external and internal liquidity. External liquidity is associated with major market structures, while internal liquidity is associated with minor structures. The video focuses on external liquidity, explaining how to spot it using major swing highs and lows, equal highs and lows, trend lines, and previous monthly, weekly, and daily highs and lows.
Why Market Does Break of Structure or Change of Character [1:17:49]
The video explains why the market does a break of structure or a change of character and then does a pullback. It notes that a bullish break of structure happens when the price breaks and closes above the previous swing high, attracting sellers and buyers. The market moves in the direction with the majority of orders to absorb or sweep the liquidity. After sweeping the buy-side liquidity, the market pulls back to look for sell-side liquidity, tapping into inducement levels, order blocks, or points of interest.
Spotting External Liquidity Levels [1:26:45]
The video discusses where to spot external liquidity levels, noting that major swing highs and lows, especially on higher time frames, are high probability areas. Other locations include equal highs or lows near previous swing points, below uptrend lines, and above downtrend lines. The video also mentions previous monthly, yearly, weekly, and daily highs and lows as prospective locations with very high liquidity.
Internal Liquidity [1:29:35]
The video introduces internal liquidity, which is associated with internal market structures. It explains that retail traders often get trapped in these areas, and understanding how they are manipulated is crucial. The video discusses common areas where internal liquidity can be spotted, such as equal lows, equal highs, support and resistance levels, trend lines, and flag patterns.
Types of Liquidity [1:31:52]
The video categorizes liquidity into four types: external, internal, static, and dynamic. Static liquidity is identified at or near double bottoms or double tops, while dynamic liquidity is associated with trend lines. The video explains that trend line liquidity and liquidity associated with double tops and bottoms are observable in both major and minor structures.
Internal Liquidity Manipulation [1:33:54]
The video explains how retail traders get trapped in internal liquidity areas, using examples such as double bottoms, double tops, support and resistance levels, trend lines, and flag patterns. It notes that smart money often manipulates these areas to absorb retail liquidity, leading to false breakouts and liquidity grabs. The video provides examples from real charts to illustrate these concepts.
Inducement: Definition and Significance [1:38:31]
The video introduces the concept of inducements, defining them as areas where retail stop losses can be hunted or as traps in the charts. Inducement is an area of deception where most traders believe it is the right time to enter a trade, leading them to wrong decisions. The video emphasizes that until there is a proper inducement in the chart, one should not think about entering a trade position.
Accumulation, Manipulation, Distribution (AMD) [1:57:23]
The video explains that inducement follows the nature of liquidity, which follows an accumulation, manipulation, distribution (AMD) cycle. Accumulation represents a stage where prices consolidate, manipulation involves sudden price movements to catch retailers off guard, and distribution is when smart money unloads their positions to eager retail traders. Recognizing these phases is essential for successful trading.
Methods of Identifying Inducements [1:59:22]
The video discusses two methods for identifying inducements: the pullback method and the trend line method. The pullback method considers the first pullback after a break of structure as the inducement, while the trend line method involves drawing trend lines and waiting for a breakout. The video notes that the pullback method is more reliable.
Pullback Method and Bullish Market Scenarios [1:59:41]
The video explains the pullback method in detail, using bullish market scenarios. It notes that the inducement is the low of the first minor pullback after a valid break of structure. The video also discusses special cases where there is no pullback after the break of structure, or where the inducement level needs to be shifted to a newly formed pullback low.
Bearish Market Scenarios and Inducement Confirmation [2:06:18]
The video provides examples of bearish market scenarios, explaining how to identify and mark inducements using the pullback method. It emphasizes that one should never think about taking a trade until the inducement level is taken out. The video also notes that inducements should be marked on the impulse move that caused the break of structure, not the corrective move.
Inducement and Market Structure Confirmation [2:09:06]
The video explains that inducement helps to identify and confirm higher highs in a bullish market structure and lower lows in a bearish market structure. It notes that a deeper pullback is needed to confirm these levels, and identifying the valid inducement level is a simple hack for this purpose.
Trend Line Method and Its Problems [2:10:03]
The video discusses the trend line method for identifying inducements, which involves drawing trend lines and waiting for a breakout. However, it notes that this method has problems, including human errors and the possibility that the price will not move below the inducement low even after a breakout. The video recommends sticking with the pullback method.
Major and Minor Inducements [2:12:17]
The video differentiates between major and minor inducements based on time frames. Major inducements are identified on higher time frames, while minor inducements are identified on lower time frames. The video also explains that in a minor structure, the last inducement before the price tests a price of interest becomes a change of character.
Order Flow and Order Blocks: Introduction [2:17:32]
The video introduces order flow and order blocks, explaining that these concepts help to spot potential areas from which to enter a trade position with minimal risk and high chances of profits. It defines order flow as the price move that reveals where smart money hides their positions, and notes that the market moves from one area of liquidity to the other.
Order Flow: Bullish and Bearish [2:20:56]
The video explains bullish and bearish order flows. A bullish order flow is represented by the last selling price before the bullish price momentum, while a bearish order flow is represented by the last buying price move before the bearish price momentum. The video also classifies order flows into mitigated, unmitigated, and failed order flows, noting that only unmitigated order flows are useful.
Trading with Order Flow [2:25:39]
The video discusses how to take trades using the order flow concept, noting that the idea is to take a trade from the order flow zone when the price comes back to test it during a pullback. It also mentions that if there are multiple unmitigated order flows, the market will likely return to the most extreme order flow.
Drawbacks of Order Flow [2:28:46]
The video outlines the drawbacks of order flows, including large stop losses, lower reward-to-risk ratios, no proper entry criteria, and the potential for human error in identifying and marking order flow areas.
Order Blocks: Definition and Importance [2:30:33]
The video introduces order blocks, noting that they are a refinement of order flow. Order blocks provide limited trades with high quality and high probability of success, and improve the reward-to-risk ratio. The video also provides a simple definition of order blocks as the last bearish candle before the buy or the last bullish candle before the sell.
Seven Factors for Identifying Valid Order Blocks [2:32:08]
The video outlines seven important factors for identifying valid order blocks: marking order blocks on higher time frames only, having a valid break of structure, looking for the last buying or selling candle, having an imbalance or fair value gap, having a proper inducement, having a proper liquidity sweep, and the order block being associated with an unmitigated order flow.
Extreme and Decisional Order Blocks [2:41:44]
The video explains that there can be a maximum of two valid order blocks within a certain swing move: the extreme order block and the decisional order block. The extreme order block is the high probability OB because it is the last resort for price to make a reversal. The video also discusses how inducements and order flow mitigations can limit the number of valid order blocks.
Bullish and Bearish Market Structure Examples [2:43:40]
The video provides examples of bullish and bearish market structures, illustrating how to identify and mark order blocks, inducements, and fair value gaps. It also explains how to use order flow mitigation to further filter order blocks.
Institutional Funding Candle (IFC): Introduction [2:55:03]
The video introduces the institutional funding candle (IFC), explaining that it is a manipulation technique used to absorb retail liquidity. IFCs are represented as the last opposing single or multiple close candles before the market forms a strong directional move. The video also notes that IFCs are related to the AMD concept of liquidity.
Why Institutional Candles Form and Their Importance [2:58:34]
The video explains why institutional candles form, noting that they are used to sweep liquidity above or below immediate resistance or support lines. It also discusses why IFCs work, noting that they represent the drawdown or loss of smart money. The video also highlights the importance of IFCs, noting that they help to determine order flow and market structure, and can be used as a trade entry strategy.
Trading with Institutional Funding Candles [3:05:53]
The video explains how to trade with institutional funding candles, noting that the first step is to mark up major swing points formed by the IFCs. It also discusses how to mark the IFC range using the Fibonacci tool, and where to place trade entries and stop losses. The video provides examples to illustrate these concepts.
Flip Patterns and Flip Zones: Introduction [3:14:53]
The video introduces flip patterns and flip zones, explaining that they indicate a market transition from one direction to the other, implying a change in market sentiment. Flip patterns are divided into two main categories: reversal flip patterns and continuation flip patterns.
Reversal Flip Patterns [3:17:11]
The video explains how to spot a reversal flip pattern, noting that the price should face a rejection from a higher time frame supply zone and then retest the last form demand zone. The price should break through the previously tested demand zone, forming a new supply zone referred to as a flip zone. The video also outlines rules and criteria for identifying valid and high-quality flip patterns and zones.
Continuation Flip Patterns [3:27:49]
The video discusses continuation flip patterns, which can be either a supply-to-demand flip pattern or a demand-to-supply flip pattern. A supply-to-demand flip pattern involves a price transition from a supply zone to a demand zone, suggesting a potential continuation of the bullish trend. A demand-to-supply flip pattern involves a price shift from a demand zone to a supply zone, indicating a potential continuation of the prevailing bearish trend.
Breaker Blocks and Mitigation Blocks: Introduction [3:33:23]
The video introduces breaker blocks and mitigation blocks, explaining that they are reference areas on charts where you can potentially find a trade opportunity. The video also notes that breaker blocks and mitigation blocks are almost the same, but their formation pattern is different.
Identifying Breaker Blocks [3:37:58]
The video explains how to identify a breaker block, noting that it involves looking for key support or resistance levels on a price chart that may cause a significant change in the price direction when the level is broken. The video also discusses bearish and bullish breaker blocks, outlining the criteria for identifying them.
Trading with Breaker Blocks [3:44:38]
The video discusses how to trade with breaker blocks, noting that when the price returns back to the breaker blocks and moves lower, we can look to enter into short trades. It also explains how to use a Fibonacci retracement tool to optimize trade entries.
Mitigation Blocks [3:45:48]
The video introduces mitigation blocks, explaining that they are similar to breaker blocks but have a different formation pattern. It notes that in a bullish mitigation block, the price fails to sweep the liquidity below the lows, while in a bearish mitigation block, the price fails to sweep the liquidity above the highs.
Rejection Blocks: Introduction [3:52:06]
The video introduces rejection blocks, explaining that they are a sophisticated concept in SMC methodology that is essential for identifying potential reversal points in the market. A rejection block can either be a sell zone or a buy zone that appears on the chart as long wicks or shadows of candles at the market highs or lows.
Identifying and Marking Rejection Blocks [3:54:06]
The video explains how to identify and mark rejection blocks, differentiating between bearish and bullish rejection blocks. A bearish rejection block occurs when the price spikes up but then falls rapidly, while a bullish rejection block is formed when the price quickly drops to a low point but then rebounds sharply.
Trading with Rejection Blocks [3:57:54]
The video briefly discusses how to trade with rejection blocks, noting that when the price comes back to test the rejection block, we can look to take short or long trade entries. It also emphasizes the importance of waiting for a clear rejection signal before entering trades.
Liquidity Voids and Vacuum Blocks: Introduction [4:02:10]
The video introduces liquidity voids and vacuum blocks, explaining that liquidity voids are related to fair value gaps, while vacuum blocks share similarities with liquidity voids. It defines liquidity voids as areas on the price chart characterized by a lack of significant trading activity or volume, and vacuum blocks as specific areas on the price chart where rapid price movements have occurred, leaving a noticeable gap or vacuum in the market.
Bullish and Bearish Liquidity Voids [4:06:44]
The video explains bullish and bearish liquidity voids, noting that a bearish liquidity void is characterized by a sell-side imbalance and buy-side inefficiency, while a bullish liquidity void is characterized by a buy-side imbalance and sell-side inefficiency. The video also discusses how to approach trades to benefit from these voids.
Vacuum Blocks [4:11:44]
The video introduces vacuum blocks, explaining that they are associated with no trading or transaction in between, leading to gaps in the charts. It also differentiates between bullish and bearish vacuum blocks, noting that a bullish vacuum block is a gap created in price action when the price opens way higher than the previous candle, while a bearish vacuum block is a gap created in prices when the market opens lower than the previous candle.
Types of Liquidity Voids and Vacuum Blocks [4:16:02]
The video classifies liquidity voids and vacuum blocks into four major categories: common, exhaustion, breakout, and runaway. Common liquidity voids and vacuum blocks appear randomly on the chart, exhaustion liquidity voids and vacuum blocks happen at the end of the trend, breakout liquidity voids and vacuum blocks happen when the price breaks out of a support or resistance, and runaway liquidity voids and vacuum blocks happen in a market with an already established trend.
Premium and Discount Concepts: Introduction [4:18:21]
The video introduces premium and discount concepts, explaining that they are simple principles that apply to buying and selling things, including instruments in the stock market or the Forex market. Premium means expensive or markup, and discount means cheap or markdown.
Drawing Premium and Discount Zones [4:22:08]
The video explains how to draw premium and discount zones, noting that it requires a swing high, a swing low, and a Fibonacci retracement tool. The area below the 50% Fibonacci level is considered the discount zone, and the area above the 50% Fibonacci level is considered the premium zone.
Issues and Mistakes with Premium and Discount Zones [4:25:55]
The video discusses issues and mistakes with premium and discount zones, noting that traders often rely too heavily on this tool or use it in market conditions in which it does not make sense. It also emphasizes that price does not owe you anything and the market does not move according to your whims and fancies.
Premium and Discount Arrays (PD Arrays) [4:29:41]
The video introduces premium and discount arrays (PD arrays), explaining that they are a multifaceted analysis that helps traders to not only see what the market is doing but also understand why it is doing so. PD arrays also take into consideration seven array items or institutional reference points: old highs and old lows, order blocks, rejection blocks, mitigation blocks, breakup blocks, fair value gaps, and liquidity voids.
Hierarchy of Array Items [4:33:11]
The video discusses the hierarchy of array items in a bullish discount array and a bearish premium array. It notes that the most relevant institutional reference point in a bullish discount array is the old low, while the most relevant institutional reference point in a bearish premium array is the old high. The video also emphasizes that traders should start looking for these reference points in the opposite order of the hierarchy.
SMC Indicators [4:38:20]
The video introduces several SMC indicators that can help traders analyze charts more efficiently. It recommends using the "No Gap Candles" indicator to fill price gaps, and also highlights several free SMC indicators by Lux Algo. The video also discusses the "Smart Money Concepts" indicator by Lux Algo, which is an all-rounder that takes care of most of the useful SMC concepts.