FUNDFLOAT
FUNDFLOAT
2023
SMARTMONEYCONCEPT
SMC STRATEGY
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INTRODUCTION
probabilities of returnand great risk-reward ratio. In Forex
Tradingit's the same thing. Fortunately, Smart Money Concepts
can assist us findingthose opportunities. We will go through all
of those concepts The Smart Money Concepts are the most
reliable concepts that will help you succeed in trading. When it
comes to investing in general, we only want to find
opportunities with high one by one, and at the conclusion, you
will be able to identify great opportunities by combining all of
them.
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MARKET
STRUCTURE UPTREND
1 Uptrend also knowed as a Bullish
Market
The first part of charts analysis is
Market Structure. The market
DOWNTREND
2 Downtrend also knowed as a
Bearish Market
structure gives us the bias, allow us
to have a first approach of the
behavior of the market and help us
situatethe price in a recent timeframe
which give us odds on which direction
it may probably move. The market
SIDEWAYS
3 Sideways or Ranging Market
moves in 3 distinct ways:
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IDENTIFY THE MARKET
STRUCTURE
The market always prints what we call Highs and Lows, identifying them is key to market structure. When
price go significantly enough over the last printed high or the last printed low, we call that a break of
structure (bos). In a trending market, the movement that breaks the structure is known as an impulsive
move, and is usually followed by a corrective move before continuing the trend with another impulsive
move. Note that market may do two impulsive move in a row, it happens when market wants to shift in
structure.
So an uptrend and a downtrend are nothing more than a series of structure breaks, to the upside and the
downward, printing higher highs/higher lows and lower highs/lower lows respectively.
When price failsto break structure to continue the trend,it shows weakness wich may indicate a trend
reversal; similary, when price breaks structure to the downside in a bullish market, it may indicate a
trend shift to a bearish market, same thing may occurs in a bearish market.
The sideways market happens when the market prints equal highsand equal lows in a row. Price stays ina
range during this pointof the market and isin consolidation. This range is broken if the price breaks out
from the top or bottom of the range. This could be the beginning of a trend.
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THE FRACTAL NATURE /MULTI -TIMEFRAME ANALYSIS
THE MARKET HAS A FRACTAL NATURE, MEANING THAT IT
HAPPENS IN EVERY TIMEFRAME.
FOR EXAMPLE, A LONG TERM DOWNTREND SEEN ON H4
TIMEFRAME WILL MOST LIKELY SHOW SHORT TERMS UPTRENDS
IN A 30MIN TIMEFRAME WHILE CORRECTING AN IMPULSIVE
MOVE; YOU CAN ALSO FIND OTHER STRUCTURE IF YOU GO
DEEPER IN LOWER TIMEFRAME.
IT'S TRUE FOR EVERY TYPE OF STRUCTURE AND EVERY
TIMEFRAME (FROM MONTHLY TO SECONDS).
HERE IS REAL-TIME CHARTS ILLUSTRATION OF FRACTAL
MARKET:
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Very important thing to understand, when you are trading on a particular timeframe, don't forget the higher timeframe trend. Here, we have to
keep in mind that on the H4 timeframe we are bearish, so we have to be careful when trading the bullish market on the 30min timeframe as it may
reverse at any moment. Conclusion, always do a 'Multi- Timeframe Analysis', and don't forget the higher timeframe trend.
Market will not always shows perfect and obvious structure. Our role is to find highs and lows that protect the structure we are following.
When searching opportunities we always want to follow the actual trend on our actual timeframe.
In a bullish market we look for buys opportunities as long as our recent higher low protect the trend, since we believe the price has more
chance to rise.
Same thing for a bearish market, as long as the last lower high is not broken, we follow the trend and we look for sells opportunity because the
price has higher odds of falling.
We want to avoid a ranging market since we don't know where the price wants to head. However, if you understand market structure, you may
spot some trending structure at smaller timeframe and catch some opportunities.
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Structure Mapping
Structure mapping concerns break of structures.
You have to know when you admit that there is a break of structure.
There are a few variations of market structure breaks. It is important that you choose between those variations and stick to it. See models:
model a: break of structure is based on the candle's body of the low.
model b: break of structure is based on the entire candle of the low and price closed below that low.
model c: break of structure is based on the entire candle of the low but price failed to close below that low. So price just wicked the low.
You must stick to your model since it will serve as the foundation of your market structure.
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Buy low & Sell high
Buying low and selling high is the strategy that market structure offered us. This
strategy is our first green light in Smart Money Concepts.
In a trending market, we simply wait for a deep correction. A correction is deeper
enough when it corrects at least 50% of the impulsive move. The market respect
this law almost all the time, that is why we are taking advantage of it.
Above 50% is the premium zone, under is the discount zone, and 50% is considered
equilibrium.
So you understand that we only buy when the price is in the discount zone, and sell
when it is in the premium zone.
On the illustration on the right, you can see that price broke structure to the
downside with a nice impulsive move. At this moment we expect a corrective move. As
we are most likely in a bearish market, we want price to reach our premium zone to
start looking for sell entry. As you can see, price has fallen after it reached our
premium zone ,broke structure to continue his trend and respected our last lower
high.
Keep in mind that market structure itself is not enough to determine if we are
taking a position. It increases probabilities of winning but we need many
confluences to be able to open a position, and market structure is just one of them
and the first one.
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Supply And DemandZone or Order Block
Supply and demand (SnD) zones, or Order Blocks, are footprints left by the
market when an impulsive move occurs. Price is most likely to come back to those
zones before it trigger another impulse move to continue his trend.
Demand zones stand as buying area and supply zones as selling area.
The footprints left may be either a ranging market or opposite candles before an
impulse move. By opposite candles we mean, brearish candles before a bullish
impulse move, or bullish candles before bearish impulsion.
There is multitude of SnD zones printed, since impulse move and break of
structure happen on every timeframe. But
we understand that the market is fractal, and depending of the struture, we know
our bias and we can already get rid of some SnD zones. So we have to combine our
market structure analysis, such as the buy low and sell high strategy, and SnD
Zones.
Once price reaches and react to an order block, we are saying that this order
block has been mitigated, and can never be mitigated a second time.
Our task here is to identify SnD zones as points of interest (poi).
Here are some examples of how we have to view the market in Structure and SnD
point of view, follow numbers for better comprehension:
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In this section, we attempt to comprehend the combination of market structure and Supply & Demand Zones. Demonstrating that we can identify various points of
interest on which we will put full attention for potential future opportunities. Spending times on charts will train your eyes to spot them instantly. You may also
note that price tends to react to a supply zone in the premium area and a demand zone in the discount area. Here is another example of combining market structure
and SnD zones:
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You can already employ a really good strategy using market structure analysis and SnD zones. But we can push the analysis deeper to see if the price we react at our SnD
zone or no.
Also, we can understand price movement and why they want to head to a direction before continuing to another one. That is what we'll cover next with concepts of
liquidity.
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Liquidity Concepts
Banks control market movements, they manipulate it. They run it in order to profit from it. As a result, their purpose is to move the market's price to where
liquidities exist. There are several types of liquidity. Knowing them all will help us comprehend price movements and will allow us to follow the banks. They will
mostly assist us in determining the best SnD zone for our entry and in placing our take profit/stop loss order.
Once again, remember the market in fractal so all of these concepts are true in every timeframe.
Swing highs / Swing lows & Trendlines
Swing highs and swing lows are just highs and lows of the structure. They are the first type of liquidity. All you have to understand is that there are liquidities
aboves highs and below lows. Price may grab those liquidities by break of structure (bos). Note that equal highs and equal lows, and trendlines build more liquidity
than a simple high or low.
Trendlines liquidities are simply highs and lows of a trending market.
These concept is due to the fact that most of traders, those who are told to trade the wrong way by "Guru's" on the internet, tend to put order at those area, such
as stop loss orders or buy/sell orders. Triggering those orders would add liquidity to the market and banks profit on that.
Session: highs and lows of sessions may also act as liquidity. Also, at the opening of sessions, volume is kicking in, and a manipulation can occurs resulting to a grab
of liquidities. The picture may be more obvious after that manipulation and may give opportunities
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Imbalances
Imbalance occurs on a regular basis in the market. They are
market voids that are most of the time immediately filled, also
knowed as inefficiency. Once again, keep in mind the fractal
nature of the market.
If we take three successive candles, the second one is the one
that may have left an imbalance, which we may notice by
checking for space between the high of the first candle and the
low of the third.
The space between is the source of the imbalance, and future
candles may fill it.
When we analyze the charts candle by candle, we can observe
that there are imbalances everywhere and price is always
filling them.
However, it becomes important to us when they are not
immediately filled. Especially when combine with SnD zones.
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Order Block
Yes an order block also act as liquidity since it attracts the price.
We previously showed how to draw SnD zones using a certain candle and a
ranging market. We may, however, be more precise and reduce these zones.
Combining with the concept of imbalance, we can refine an order block until
there is no more imbalance in it. We can go to the lowest timeframe and refine
our SnD zone, since we understand that price still may fill all the imbalance
before reacting.
For example, if you draw a SnD Zone on 15min timeframe, you may notice an
imbalance in that order block on the 5min timeframe, and so refine it until you
have find the last point of liquidity that price may reach.
By doing that, you will dramatically boost your risk-reward ratio by lowering
your stop loss.
However, you must develop your own method of refining that is appropriate for
your plan. Because over-refining might cause you to miss certain trades and
affect your trading psychology.
We'll go over this section in greater detail later in last chapter.
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Inducement
Inducement occurs when the market adds liquidity
to a SnD zone. It might be highs and lows, equal
highs and lows, or a trendline.
For example, when a price approached a demand
zone but failed to enter and finally reversed,
liquidity is created by generating this swing low.
We now have this swing low as inducement, which
leads us to assume that price will seize it and
react to the demand zone.
As an inducement, equal lows and highs, or
trendline would signal an even stronger SnD zone.
We primarily employ inducement and imbalance to
increase the trustworthiness of our SnD zones.
Follow the numbers for better comprehension:
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We've previously combined several ideas.
Let's do a quick recap:
1. Market Structure: Build your bias and give odds to
where the price wants to head on a higher scale. Added to
this, the Buy Low/Sell High
Strategy.
2. Supply & Demand Zone: Zones created by the structure
that may trigger the next impulse moves.
3. Liquidity: Give us a "narrative" about where the price is
most likely to move before moving in another direction.
These examples demonstrated how to mix them all.
What you have to understand is, either you spot the liquidity or be the liquidity.
Now that we've covered market structure, SnD Zones, and concepts of liquidity, let's take a look at how we may open positions as precisely as
possible.
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Taking a market position is always predicated on a smaller timeframe than your market structure and SnD zones analysis. This is when the
market's fractal nature comes into its own. All of the prior concepts we've learnt up until that point will help us be as precise as
possible.
Weak Hands to Strong Hands
When price is approaching our point of interest (SnD
zone), we jump on lower timeframe to see the
behavior of the price. What we want to see is what we
call the transfer from weak hands to strong hands.
For example, at a supply zone, weak hands would be
buyers and strong hands would be sellers. A schematic
will be developed if this transfer occurs. So, we will
be interested to sell at this supply zone.
This transfer is nothing more than a reverse of the trend on your entry timeframe. Fortunately, there are 2
schematics that market tends to print at those area showing us this transfer.
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To be valid, the schematic must follow to a
set of rules.
First, there must be a grab of liquidity; the
more he has to grab, the better the scheme.
The price then have to break structure to
indicate a trend reversal. It may construct
an inner structure before revealing his
plan to reverse. (like the example here)
Finally, the price must move to the last
order block that triggered the last bos.
This is where we will open a trade since it
will certainly trigger the major impulse
move from which we will profit.
As you can see, we just repeat the analysis from higher to lower timeframes. The market constantly shows us what it intends to do, and we must wait for a clear
situation.
Don't forget that the direction you choose to trade is always based on market structure. And you have to correlate your structure analysis from your higher to
entry timeframe. SnD zones and order blocks are here to trigger a move that we may profit on.
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We now understand that we never predict the
market, but rather react to it. However, the
difficulty here is to recognize the schematics and be
ready to open our positions.
The 2 types of schematics that show us the transfer
from weak hands to strong hands are as follow:
To avoid any confusion with our higher timeframe
analysis, we use other terms on our entry timeframe.
Sweep stands as liquidity grab. SB is an abbreviation
for Sub-Break of Structure.
Personally I am using the term Major-Break (MB) for
higher timeframe break of structure, Inner-Break
(IB) for inner structure break, and, Sub-
Break (SB) for break of structure when it comes to
my entry timeframe. MB would be for H4 timeframe
structure analysis, IB for 15min and finally SB for
1-3min timeframe charts. This keep me out of any
confusion of all the structure analysis I am doing.
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Order Flow and Scale In
Order flow is just a reflection of the trend.
When we have confirmation of weak hands to
strong hands on our choosen timeframe chart,
the market may continue to print SnD zones on
the same timeframe. So we have the possibility
to take positions on each of those SnD zones as
long as we recognize that a change from weak
to strong hands occurred and agree that the
price must move in the right direction.
For example, I look to see if the transition
from weak to strong hands occurs on '1min'
timeframe chart.
And if that happens, I'll keep an eye on the
market and add positions, scale in, on each SnD
zones until the price hits our final liquidity,
which is acting as our take profit.
Here is a real chart example of order flow /
scale in trade, on 1min timeframe :
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Session / News / Broker / PropFirm
Session : As previously said, session highs and lows may act as liquidty, attracting the price. Additionally, certain
pairs may move more significantly during some sessions. The major pairs that I recommend you focus on tend to move
and provide more opportunity during the London and New York sessions.
So we need to know when the sessions are. You can make it easy by using this website:
https://forex.timezoneconverter.com/
News: economic news and events can have a huge influence on the market. Traders try to avoid trading during high-
impact news since we can never foresee how the news will affect the market. However, economic news may cause a
significant liquidty grab, which may lead to some opportunity after that.
To be aware of all the economic news and events, use this website: https://www.forexfactory.com/calendar
Broker: Selecting the right broker is essential. It will charge you to link your funds to the FX market. They charge
you in two ways: with a large spread or with a commission. I recommend that you go with a broker who charges you
commissions and has a smaller spread. Make your own online research, study customer reviews, and keep the
commission and spread in mind.
Prop Firm: Prop firm is the game changing. Nowadays, we can ear big capital to trade with them. To be able to earn that
big capital you have to pass their challenge. Once it's done, you split your profits with them. They take 15-30% of your
returns on average, and capital may reach a million dollars depending on the prop firm. Some prop firms use their own
broker which you can trust.
Prop firm are really something to take in consideration to go to the next level fast.
To be a profitable traders you have to create a Trading Plan that brings together all these concepts as well as rules
to facilitate the psycological part of trading.
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Create your Trading plan
In order to be a profitable trader, you must have
a trading plan. When you have your trading plan
in place, you just have to repeat and repeat the
plan to be consistent. Here are all the questions
you have to ask yourself before and during a
trade in order to build a strong trading plan.
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Market Environment/General Question
These questions form the backbone of your trading strategy. These are the typical
questions that will determine your trading 'lifestyle'.
. Trade Mangement: How do I manage my trades ? The placement of my take profit is based on what ? Do I
. Which broker should I go with? What is the spread applied by this broker on the pairs I am trading? How
take partials or close all my profits at once ?
. I've opted to trade with a prop firm; what are the terms and conditions for trading? What
much commission do they charge?
. Which session am I trading ? Do I have time to trade this or those sessions ?
spreads or commissions does their broker use?
. Am I trading during high-impact economic news? Is this a risk I'm willing to take?
.. Market Structure: Wich Timeframe for the general bias ?
. SnD Zone: Wich Timeframe to draw my SnD zones ? (Must be lower that Market Structure analysis
Which risk-reward setup am I trading?
. WHICH pairs am I trading ?
Entry Type: Wich Timeframe am I opening position ? (Must be the lowest)
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