Brief Summary
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Transcript
Full transcript of “The Ultimate "Smart Money Course" Ever🔥 | Liquidity - Imbalances - Manipulation | SMC | ICT |”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:05 hey guys welcome back to the channel recently I have received a lot of request from my subscribers to make a complete course on Smart money Concepts from the very basic to the advanced level so I posted a community poll to see if the majority were actually interested and the poed results were extremely positive about 90% of all who participated wanted to learn smart money concept so here I am thrilled to present you with this new video course on Smart money concept the course is designed in an orderly manner to provide you with the most comprehensive understanding of the principles and strategies associated with smart money Concepts I'll be taking a very conventional approach assuming that all of you are complete beginners
0:51 to this topic keeping that in perspective I will discuss the main Concepts in Greater detail which is actually essential to build a solid foundation so that we can have a good understanding about the strategies that we can Implement as a trailer this will in turn enable us to plan our proper entries stop-loss and targets thereby generating High reward to risk rates which is the highlight of this entire SMC concept I'm not even joking when I say higher water to risk ratio we are literally talking about 10 is to1 or 20 is to1 or sometimes even a whooping 40 is to1 reward Tois ratio which is abs absolutely insane and that tells you how powerful these concepts are by now I have mentioned smart money Concepts numerous times but what exactly are
1:39 smart money Concepts I don't want to bore you by giving the same old answer that these are techniques or methods used by large institutions hedge funds Banks Etc who are referred to as smart money due to the reason that they make smart decisions in the market and most of these concepts are purposefully kept away from the reach of uninformed retail Traders but my Outlook on Smart money Concepts is different I like to view them as traps set by the big institutions to use retail orders usually the stop-loss orders to generate enough liquidity so as to buy at discount and sell at premiums think of these methods as manipulations or stop-loss hunting or liquidity grabbing or simply the inducement of retail traders to enter into wrong trades at
2:26 the wrong time or wrong locations I know these terms are a little over your head but fear not because we are going to deal with all these terms in the upcoming episodes and I guarantee that you will love it a lot of research learning preparation and hard work has been put into making a very relevant course and that to absolutely free of Coast I doubt if anyone would take all the pain to make genuine content for my retail Trader Brothers so I request you to wholeheartedly like this video and support the upcoming videos also and share all the episodes with all those who are willing to learn and improve their trading but don't have the money or means to do so also make sure to subscribe to this channel because it's free and also enable the Bell icon so
3:12 that you will receive notifications when I upload the new episodes so in this video I would like to give an idea about the course structure and why you should learn these Concepts then I will answer the Evergreen questions like which is the best Market to trade SMC techniques will it work in the Indian market which is the best time frame to analyze and trade smart money Concepts or should we use the multi-time frame analysis approach but before all that I would like to take this opportunity to thank wickoff theory developed by Mr Robert wickoff during the early 20th century so you can think how old these concepts are actually the whole wickoff method is based on the premise that the market is manipulated by a small group of Traders or so-called the smart money who have
3:58 the ability to influence Market movements these smart Traders or institutions use their knowledge and resources which include data about retailer orders and retailer behavior and they use this information to accumulate or distribute assets before the public is even aware of their intentions or in simple layman terms they manipulate the market to trap retailer liquidity smart money Concepts or institutional Concepts theory is improved by The Works of inner circle Trader Tom Williams Steve Morrow and a few others every now and then these concepts are given a new look and some flashy names but the concepts Still Remains the Same think of it like companies introducing their old product in a new exciting packaging inducing you
4:44 to buy these courses so I urge you not to spend a lot of money on these expensive courses because these series of episodes will be more than sufficient to understand the concepts and strategies but I have an advice I would like you to watch my courses on price action and supply and demand the reason why I'm suggesting this is because smart money Concepts price action and supply and demand Theory are all interconnected and have a lot of similarities this just the terminology that changes most of the underlying ideas are the same the Crux of smart money concept is simply this markets are manipulated by big institutions and funds and they use the liquidity of retail Traders against them now coming to the second question why do you as a retail Trader need to learn
5:31 about these Concepts and is it necessary actually I can give an answer to this question in a single sentence it is just that if you don't know where the liquidity is then you are the liquidity every move in the market is in some way a trap set for the uninformed retail Traders most of the retail Traders blindly follow certain strategies patterns and some even call themselves breakout Traders while other identify themselves as reversal Traders and so on but until and unless you don't understand how and why a price move was triggered you will remain as a tiny fish in the ocean being hunted over and over again by the big institution of the smart money so having a good grab of these techniques can give you a boost to
6:16 your understanding on how to track the liquidity and how to capitalize on it just like the institutions you will definitely start thinking differently and view charts with a broader perspective because I strongly believe believe that every move or even each candle formed in the market has a meaning or a logic behind it if learned and implemented in the right manner these Concepts will definitely take you to the next level now another doubt that most of you might have will be regarding the type of markets in which these Concepts can be applied to be frank these Concepts can be applied on all those markets which have ample liquidity so liquidity in simple terms is the ease of buying and selling of an asset without much slip pages meaning that there are enough buyers and
7:02 sellers available for the smooth transaction of Assets Now the more difficult it becomes to buy or sell an asset the asset is said to be less liquid now how do you know if the market or chart you are looking at is liquid or not now there are a few ways to find this out the most simple method is to look for trading volumes as you may all know trading volume refers to the number of shares traded in a particular time frame or period it could be for 15 minutes or 1 hour or a day or a week a high trading mum indicates that there is a lot of interest in the stock or an asset and it is highly liquid with this we can say that most indices are highly liquid so to answer your question these Concepts will work well in indices like
7:47 Nifty Bank Nifty Etc but when it comes to stocks you will have to compare the volume of a stock with its competitors to get an idea and along with that we also need to look at the bid ass spread and the market capitalization of the stock in simple terms the market capitalization of a stock is the total value of all outstanding shares so a higher market capitalization generally indicates a more liquid stock as there are more shares available for trading on the other hand the bit ask spread is the difference between the highest price that a buyer is willing to pay for a stock or it is called the bit price and the lowest price that a seller is willing to accept or the ask price so a narrow bit of spread indicates that the
8:34 stock is highly liquid as there is a lot of activity in the market and the buyers and sellers are very close in their pricing but if the bid are spread is wide then the stock is less liquid or there is less activity taking place so if you're trading in the Indian markets I recommend you stick with the top nifty50 stocks or maybe just select the top 10 stocks that you like from the nifty50 range of stocks from different sectors and if you are a beginner try your best to avoid mid gaps and small gaps because the price action may not always be that smooth and sometimes things may not work out but the best markets to trade smart money concepts are Forex and crypto markets which are open for almost the entire week thereby
9:20 providing a much smoother price action but this does not mean that all Forex payers and cryptocurrencies are equally liquid there is Euro USD USD JPY Etc which are highly liquid currency payers and cryptos like Bitcoin ethereum Etc are highly liquid on the other hand there are other currency pirs like cadchf or pln JPY or even cryptos like kucoin or gatecoin Etc which are not liquid so in short you can use the smart money Concepts to trade Forex markets crypto markets indices and stocks all of which having high liquidity now moving on to the second most popular question which time frame should I choose to trade smart money Concepts to be
10:06 absolutely Frank we need to follow a top down approach that is we need to start our analysis from the higher time frames or the trend time frames to identify the larger market Trend and mark the areas of values and then move down to an intermediate time frame to spot nested areas of interest for refining our higher time frame analysis is and also to identify the market liquidity and finally move down to a lower time frame to take a proper entry set a stop- loss and place a suitable Target now SMC technique will work for all trading Styles whether you are a swing Trader or intraday Trader or BTSD Trader it doesn't matter what your trading style is I have already made a detailed video
10:52 on how to select the proper set of time frames based on your trading style that you follow so you can watch that video to know more about multi-time frame analysis now finally let's look at how the entire course is structured as I have mentioned earlier we will go in depth into the most important smart money Concepts as shown on the screen once you become familiar with all these terms and their meanings we will discuss the application Side by learning how to use these concepts for trading in the live markets that is how to implement these SMC strategies we will also talk about the risk management part where we will learn the entry stop-loss combined with the proper exits to plan a high probability High reward to risk trade last but not the least I will also
11:39 discuss an indicator that will make things very easy for you so that you don't have to analyze each chart from scratch this indicator you just need to cross check the validity of the generated SMC signals for trading sorry to interrupt but this could be important for you have you been in a situation where you want to invest your pressure Savings in the stock market but there are just too many stocks to choose from and too many gurus giving stock tips it's risky and you don't want to take the hassle of reviewing the fundamentals and sweating over the company's performance then there are the same old mutual funds no doubt mutual funds are great investment instruments but they are mostly vanilla and less transparent
12:24 introducing small cases a small case is a ready-made basket of stock or ETFs which reflect an idea theme or strategy it is just like a supermarket where everything is available everything is clearly labeled with the right variety and options now let's look at a scenario what according to you is the future of the Indian economy well to begin with the Indian economy is going good according to some reports in the coming next 15 years 45 CR people will be joining the middle class which is actually huge this means more buying power now if there is money then the demand will also increase so now what do you think these people will do with the income they're left with after paying for rent and food luxuries branded
13:10 products travel and more with the Great Indian middle class small case you can invest in all those companies who will benefit from the growing consumer demand through just a single product you can invest in a readymade portfolio of stocks well that all sounds very great but then who puts together these portfolios small cases are created by sa registered professionals who have an idea or strategy these guys do all the hard work of selecting stocks and deciding how much money is allocated to each stock remember there are many such small cases and enough options for everyone what if I need to know more about small cases like the past performances the stock selection or things like that small cases present all the necessary
13:57 information for you to make a decision you can look at the cagr today's change and risk profile you can see all the stocks and weights and see the criteria behind picking of these stocks measure past performances of lumpsum and sip you can also see the news related to these stocks all you have to do is Click invest and the best thing when you invest in small cases you only pay when you transact there are no expense ratios it means that the cost is low and investing is easy moreover your stocks and each ETFs will show up in your demat account so what are you guys waiting for stop picking stocks that you don't understand instead invest in ideas that you believe in through small cases the link is in the description happy
14:43 investing now let's get back to the video let's say you are a curious kid and you asked me to explain what smart money concepts are in a single sentence then I would say smart money concepts are a few methods of identifying planning and executing trades on the basis of where the majority of Market orders are and what the major Market direction is so in a nutshell it all comes down to figuring out the market Direction and where the major liquidity is there for taking so as you might have already guessed the initial step is to identify the market Behavior at a particular time period or to be more precise we are interested in identification of a proper mark Market
15:29 structure so that we can plan our trades based on the dominant Market Direction so in this video we are going to deal with the idea of Market structure with respect to Smart money Concepts now you may ask me haven't we already discussed the concepts of Market structure and market trends in the price action course actually yes we did but when it comes to Smart money Concepts Market structure identification involves a lot more abbreviations new terms and stuff like bow chalk strong highs strong lows weak highs weak lows Etc but the overall idea Remains the Same I personally think that with smart money Concepts you will get to understand Market structure and it's working in a much greater detail and in
16:16 addition to this we will also get a Clarity on the major Market structure and the minor or internal Market structures and we will also talk about the nature of pullbacks for both these structures so let's get going right away now you may be familiar with the fact that a liquid Market or a stock or any asset goes through several Market phases majorly the accumulation phase the markup phase the distribution phase and the markdown phase now there can also be subphases like the reaccumulation or redistribution phases but my point is that even though there are several phases of the market the overall Market structure boils down to three three main stages or Trends namely the uptrend
17:02 structure the downtrend structure and the sideways or range bound Market structure now as you may already learned from the price action course an uptrend is characterized by higher swing highs and higher swing lows while downtrend forms when price forms lower highs and lower lows and when it comes to sideways Market there is no clear Trend or Price action or simply the price remains within a range now this is is a very basic way of understanding Market structure and Trends but in this video let's build on top of this basic idea so in smart money Concepts we are mostly interested in trending price action when compared to sideways or range bound price action but this does not mean that we can completely avoid sideways ranges
17:49 and it is not the right way to think about it because further forward in this course we will definitely talk about how to deal with our trade on Range price action meanwhile let us now focus on the two main structures based on SMC technique now these are the bullish Market structure and the bearish market structure so think of a bullish structure as an uptrend with many more constraints and on the opposite think of a bearish structure as a downtrend but with a lot more constraints or factors to consider first let us take a look at a typical bullish Market structure and yes you are right we need to look for higher highs and higher lows but Market structure is not always that easy to identify it is more complicated and
18:34 challenging that we think I personally believe that if you get this particular step right then you'll be able to get most of your trade analysis correctly in fact this is the step where most people make mistakes so when you commit a mistake at the start of your analysis itself then naturally the rest of the process will obviously amplify the initial mistake and finally you'll be left with a corrupted and incorrect anal analysis in hand and guess what all of this will result in a wrong trade at the wrong time and the wrong location with you making huge losses and at the end of the day you will have no idea where things went wrong so my request is that you strengthen your Basics first now with that out of the way let us understand a bullish Market structure
19:20 see as mentioned just now Market structure will not always be very easy to identify and Mark sometimes it can be confusing and comp complicated take a look at this chart at a single glance can you determine the overall Market structure well most of you would not be able to actually this is a bullish Market structure and why do you think you are not able to identify this the simple reason is that your eyes are not trained to look for specific details let me explain this now you might have learned that market moves in the form of waves and during a trending move there is an Impulse move and a corrective move this is true and I don't have any problems with this idea but what needs to be added in this context is that a
20:05 market structure comprises of two structures that is there is a major structure and there is a minor or internal structure and as the name suggest the major structure is the dominant structure or it is the major structure that determines the dominant player in the market now the minor or internal structure is the less important structure that gets formed within the major structure so if you are planning to be an SMC Trader then you should train your eyes to spot these Major Market structures in comparison to the minor structures because it is the major structure that majority of our trades will be concentrated on now you may ask me which time frame we should look for the major structures now we will get to this topic of time frames in a later on
20:52 video but for the time being keep in mind that we have to look for the major structures on the higher time frames for our analysis you can check out my detailed video on time frame selection to learn more about how to select proper time frames based on our trading Styles moving on let's learn how to map the major Market structure and also discuss what the breakoff structure and change of characters now this is important because it helps you confirm the major swing points that is it lets you confirm the higher highs and the higher swing lows in a major bullish Market structure from the minor swings which actually behaves like noise in our analysis similarly it can help to confirm the lower swing highs and the lower swing
21:37 lows in a bearish market structure from the minor or internal structures now take a look at this the market momentum is bullish the market created a low and a high then the price made a retracement or a pullback then once again the price moves higher and breaks and closes above the previous High now this is called a break of structure or simply boss or spelled as BOS it is also called as a continuation break as the price resumes in the major Trend Direction so technically a bullish break of structure happens when the price breaks and closes above the previous swing high or the higher high please do note that the price has to close above the previous swing high level for this to be
22:24 considered as a valid breakoff structure just a liquidity sweep or simply a false breakout associated with a long Wick does not qualify as a breakoff structure in addition to this only when a bullish breakout structure happens then only the higher swing low level is confirmed and as you may know a higher low is the lowest swing Point Which is higher than the previous swing low level in a bullish trending Market structure now what happens after a bullish break of structure how do we confirm a higher high now listen to me carefully price rarely moves in a straight line If You observe within a larger Trend there are almost always counter Trend moves these counter Trend moves are the results of lower time frame liquidity hunting so
23:12 once the price bounce or get rejected from a level then normally it will Target a previous short-term higher low before continuing in the same direction as the longer term Trend and for some of you this might be a very New Concept and by the way this is called as an inducement which is a very important topic in SMC and we will discuss this concept in our upcoming episodes and once we get used with all these small topics we will combine all these Concepts to finally understand what a true SMC structure looks like and how it works in a very practical manner but for the time being let us go ahead and understand how a higher high of a major bullish structure gets formed using a concept that most of us are already
23:59 aware of it is none other than pullbacks so the price breaks the previous high and it moves higher but it cannot go higher indefinitely at some point it has to come down which we call as a corrective move so we can say that a bullish Market structure is a combination of bullish impulse moves and corrective pullbacks now you can ask me do all these pullbacks or Corrections matter the answer is no we are more interested in those deeper pullbacks now how do we know if a pullback is deep enough for this purpose we can make use of the Fibonacci retracement tool so a deeper pullback is a retracement that goes beyond the 38.2 per to 50% or even
24:47 lower Fibonacci levels without closing below the previous swing low or higher low levels the reason why we require a deeper pullback is because there is a lot of liquidity available below these internal pullback levels and for the market to make a meaningful move it has to tap into these retailer orders and then use these orders as a fuel to move higher this is a very simple explanation of a much complicated concept I hope you guys have understood what I'm trying to explain anyways once we have identified a deeper pullback using Fibonacci retracement tool we can now Mark the highest point after the previous breakoff structure as the higher higher level and now once again if the price moves higher and if it manages to break
25:33 and close above the recent higher high form then again we have a bullish break of structure and this step will confirm the higher low level which is in fact the deepest pullback before the break of structure has happened so in short a new higher high is confirmed only after a deeper pullback has happened which will actually sweep all the previous retailer liquidity below the internal or M swing lows and on the contrary a new higher low is confirmed only when a valid bullish breakout structure happens now what happens when the market fails to make a new higher high that is the break of structure fails but instead the price breaks and close below the previous higher low level so if you have watched
26:19 my price action course carefully then you know that this is the first sign of a change in the market structure from bullish to bearish or in other words we can say that this is the start of a new trend reversal and in smart money terms this shift in the market structure is called as a change of character or simply chalk but do keep in mind that the price has to break and close below the previous higher low for the chalk to get confirmed this is very important as many Traders make mistake in this part as just a liquidity sweep or a false breakout with a deep Wick projecting below the higher low low does not qualify once a change of character takes place we will now focus our analysis
27:04 towards the formation of either a bearish market structure or a sideways Market structure we should consider the possibility of both these structures until and unless we get a solid confirmation for the continuation of the bearish market structure let me explain this in Greater detail we know that during a downtrend or a bearish market structure we expect the price to form low low swing highs and lower swing lows so if you want to be an SMC Trader you have to train your eyes to find these important levels but trust me it is not as easy as you think because in most trading textbooks we will find a very simple and straightforward method of identifying Market structures but in real Market scenario it is much more
27:50 complex so listen to me carefully in order to confirm a lower low in comparison to the previous swing low the price has to do a pullback not just any pullback but a deeper pullback taking out the liquidity of the previous internal swing high levels now you can identify if it is a deeper pullback or Not by using a simple Fibonacci retracement tool and check if the pullback is over 38.2% or 50% or even higher levels but as long as it does not break and close above the previous major swing high level we are okay with it now what is the significance or maybe what is the logic behind wanting a deeper pullback now the logic is quite simple and it is associated with the retailer mentality
28:36 so as a retailer what will you do when you spot a breakout or a breakdown obviously you will take a trade in the direction of the market break right now where will you place your stop- loss quite clearly you will place it beyond the breakout level so in case when a retailer sees a bullish breakout structure most probably he will place stop loss below the previous minus swing low level and if he spot a bearish change of character he will take a short position and he will place the stop loss just above the previous minor swing high level right clearly these swing levels just before a breakout or a breakdown or in other words these swing levels just before a break of structure or a change of character have a lot of stop-loss
29:22 orders available these stop-loss orders are in fact retailer liquidity which the smart money is so Keen to exploit and these clusters of stop-loss orders helps the smart money to buy low and sell high now coming to the reason why these deeper pullbacks are important it is quite evident that these deeper pullbacks are actually searching for retailer liquidity and once the liquidity is absorbed the market usually tends to continue strongly in the major Trend Direction so we have to look for a deeper pullback after a change of character has taken place so as to confirm if the low formed is actually a lower low or not don't worry if you have not understood this concept completely you can either watch this concept multiple times and still if the doubt
30:09 persist you can wait for the upcoming episodes where I will talk about inducements order blocks Etc so that you will get a deeper understanding on the smart money concept structure mapping now moving on after the deeper pullback taking out the retailer liquidity and confirming a lower Lo the price moves lower and it breaks and closes below the recent lower low level this is called a bearish breakoff structure or simply boss I'm stressing the point that the price needs to break and close below the previous low level to confirm a valid breakup structure just a liquidity sweep or a force breakout with a deep Wick projecting below the low low level won't count as a valid breakoff structure now
30:55 only when a valid breakoff structure happens can we actually confirm the lower high level so long story short a lower swing high is confirmed only when there is a valid bearish breakout structure and on top of that the lower swing high is the highest point before the boss and the previous lower low level and all the other swing Highs are just the internal or minor structures and we don't have to give much importance to these as an SMC Trader the major structure matters to us the most and we conduct the analysis for our major structure on our higher time frames to get the best possible results because in the lower time frames charts are more random and noisy now once again the price has to search for liquidity in
31:40 these intermediate or internal swing highs and in doing so it forms a deep pullback which sweeps the liquidity in those levels and then moves slower now once the liquidity is absorbed by a deeper pullback which can be measured using a Fibonacci retracement tool we can confirm the new lower low level then again the price has to move lower and break and close below the new lower low formed to confirm a valid break of structure and in turn the highest point before the boss and lower low will be marked as the new lower high level and this process continues until the price fails to break and close below the previous lower low level and instead it breaks and closes above the previous
32:27 lower swing high level now what does this indicate this actually signals a change in the sentiment or it can be thought of as the first indication of a reversal that is the trend might change from bearish to bullish so this shift in the market structure is called as a change of character so now we have to change our perspective and we have to look for a bullish structure or a sideways Market structure and by now you might already be familiar as to how to identify a bullish Market structure right but hey I haven't talked about the sidewise market structure right but you may already be familiar with the accumulation or distribution phases from my price action video These are phases where the market takes a break or where
33:12 the big institutions start building their position which is actually represented by the accumulation phases or where they start selling their Holdings which is called as the distribution phase anyways the sideways Market structure can be any of them think of it as Market taking a pause or a breather and only when the price breaks and close above or below the constrains of this phase are we really interested in making a move so as an SMC Trader or a price action Trader it is always ideal to wait out the sideways market and focus more on the trending Market phases for your trades now before I finish this episode I have to discuss a few more terms like strong highs and strong lows weak and we lows Etc now
33:59 these are just additional information which is built on top of what we have already learned in this video and it's nothing new so a weak high or a weak low refers to those swing highs and lows which have a greater possibility of getting swept so for example a higher high is considered as a weak high as it has a good possibility of getting taken out by a bullish breakup structure and similarly a higher low is considered as a weak low as there is a good chance that a change of character can take out this higher low on a same note during a bearish market structure a lower low is marked as a weak low as there is a good chance that it can be taken out by a bearish breakup structure and similarly
34:45 a lower high is considered as a weak high as it can be easily taken out by a change of character so in short a weak low or a weak High has a greater chance of getting taken out by the market contrary to this strong highs and strong lows are those price levels which are not easily taken down by the market so typical examples of this are the higher highs just before a change of character meaning that the market was not able to take out the higher high level which makes it an important level for future price analysis as it could play the role of a potential resistance level in the future similarly a lower low just before a change of character is considered as a strong low for future analysis because the market was not able to take out this
35:32 level and it can act as a meaningful support level in the future now other than these uh there are equal highs and equal lows and as the name suggest they have same high or low levels now we will understand the significance of all these as we move along this course but I think this is enough for this particular video and after a few more episodes we will revisit this topic once again but then we will discuss the topic completely using relevant charts be it Forex charts or Nifty or Bank Nifty charts anyways uh I would like to end this video by mentioning that market structure makes up the backbone of the market and it is essential in understanding if you want to be able to read the market more precisely and clearly so as to be able
36:17 to trade in it successfully in the previous episode we have understood about the market structure mapping in great detail in this video I would like to introduce you to a completely new topic it is known in different names in SMC B fair value gaps imbalance inefficiency Etc but the overall concept Remains the Same what you need to keep in mind is that such imbalances in the market happens due to irregular or disproportionate price movements these price movements May deviate from what is considered normal or expected based on historical price pattern terms fundamental analysis or technical indicators such inefficiencies
37:03 or imbalances can create potential trading opportunities for both investors and Traders but imbalances in price Behavior can take different forms just think about it could be in the form of gaps volume imbalances spikes lack of liquidity displacement Etc now I will try to explain each one very briefly to get a general idea of what is what let's start with gaps price gaps occur when the opening price of a candle is significantly different from the previous candles closing price so a gap has a complete absence of trading activity between two Candles now these gaps can be caused by various factors such as overnight news earnings reports or other Market moving events and gaps
37:50 can be of different types it can be Breakaway gaps Runway gaps exhaustion gaps and professional gaps depending on the type of Gap you can choose to adopt a particular strategy to capitalize on the imbalance I have already made a detailed video on gaps and how to trade them in my complete price action course you can check that out to learn more next up is volume imbalances a volume imbalance is a gap between the closing and opening price of two candles and the difference in between a volume imbalance in fact has a trading activity happening or there is an overlap between the high and low prices when compared to a price Gap now a quick example of a volume imbalance would be from this closing price to this opening price and also we
38:36 have a gap however the price did manage to trade through these areas so it is indeed a volume imbalance and not really a price Gap moving on price spikes refer to sudden and sharp movements in a Securities price often resulting from an unexpected event or a large surge in trading volume now these spikes can be caused by different factors such as Market orders stop-loss triggers or algorithm trading activity now in some cases low trading volume and liquidity in a particular stock can lead to inefficiencies as it may result in a wider Bidar spread and difficulty in executing trades at desired prices so Traders need to be cautious when dealing
39:22 with ill liquid stocks as it can be challenging to enter and exit their positions without cusing significant price impacts now all these are in some form or the other a type of imbalance in the market but when it comes to Smart money Concepts we are only concerned about the imbalances caused due to displacements so displacement in short is a very powerful move in price action resulting in strong selling or buying pressure generally speaking displacement will appear as a single Candlestick or a group of candles that are all positioned in the same direction now these scandles typically have large real bodies with very short bcks which suggest that there is a very little disagreement between buyers and sellers or in other words
40:07 only one party has a clear dominance over the other most often a displacement will occur just after a liquidity level has been breached where there are clusters of orders and this will often result in the creation of both a fair value Gap and a market structure shift now we have already discussed Market structure mapping and terms like boss chalk Etc in the first episode so make sure you have a proper knowledge of the same but right now what we are concerned about are fair value gaps or inefficiencies or simply imbalances so after the price reaches a particular liquidity level where large numbers of orders are accumulated and when price reverses after absorbing the liquidity from this area often what will come next
40:54 is displacement so these fair value gaps are usually created within these displacement moves which means that these are instances in which we can spot inefficiencies or imbalances in the market I have talked about liquidity levels where most of the orders are accumulated but how to identify these levels there is a simple rule to spot these areas so the last bearish candle or selling momentum before an up move is referred to as a bullish order block there a large number of biod ERS are assumed to be located similarly the last bullish candle or the last buying momentum before a down move is referred to as a bearish order block where a large number of sell orders are assumed
41:40 to be clustered just keep this in mind and don't stress a lot because we will learn all this in great detail in the upcoming episodes now you can ask me why is an imbalance or fair value gap for that matter considered as an inefficiency the reason is simple and straightforward when price moves strongly in One Direction and that too by means of large bodied Candles there is a clear discrimination between the buyers and sellers let me explain imbalance as the name suggest is an area of unequal Market moves where there are only buyers or only sellers which exist in the market the reason we call this an imbalance is not only because it is an imbalance between buyers and sellers because there is literally an imbalance
42:26 in the market trading volume is tilted either towards the bid or outside too quickly so there are still a lot of unexecuted orders in the market so if you have an impulsive move to the upside it is because there are no sellers to absorb the buying pressure of the Bulls this means that there is no resistance from sellers to stop the buyers from pushing the price up rapidly on the other hand if we have an impulsive move to the downside it means there are no buyers to absorb the selling pressure of the beers this means that there is no resistance from buyers to stop the sellers from pushing the price down rapidly simply put imbalances occurs when there are many orders of the same type be it buy sell or limit orders and also a lack of liquidity or counter
43:12 orders in the market for example if there are many more buyers of a stock that sellers then the balance can tilt in the favor of buyers and on the chart this imbalance looked like a price Gap within which only a part of the volume has been traded this is an unhealthy price action because it shows the disequilibrium between buyers and sellers so an imbalance means unfair price action where the market will almost always come back to fill another thing to not is that the Wicks do not fill each other and if they do then it is healthy price action or efficient price action and not really an imbalance so to put it simply Market inefficiency occurs when the Wicks are separated by a distance or a gap and they do not meet while an Efficient Market on the other
43:58 hand is one in which the Wicks do not have a gap between them and they actually meet this brings us to the next important Point how to identify or spot an imbalance or a fair value Gap within a particular displacement move to be absolutely clear an imbalance can be defined as an imbalance between buyers and sellers so a bullish imbalance has more buyers behind it and obviously a bearish imbalance has more sellers behind it so when you see an impulsive move to the upside or downside in the market with no Wicks overlapping full bodied candles this is where imbalance in the market are formed these can happen on all time frames now when looking for an imbalance in the market simply look for any candle which has a
44:44 full real body and look for the part of this candle that is not overla by the previous and next candles week this signifies an imbalance in the market because there were only a few transaction going going on between buyers and sellers we can clearly say that one party has overpowered the other depending on the direction of the price now if you think about it Wicks usually represent price oscillating up and down within the time it takes to print an entire candle showing that the price is efficient because there were continuous transaction happening between buyers and sellers so it shows us that price is giving both buyers and sellers a fair chance at accessing the liquidity so when the big me it provides the buyers and sellers and access to get into the
45:30 market and profit on the price move but on the contrary when you see a full bed candle with no wigs overlapping it it is obvious that you have identified a clear imbalance in price this may seem very complicated and over the R so let me break this down further and help you understand it better now a very simple method to keep in mind is to think of a fair value Gap as a three Candlestick pattern where the first candles low does not overlap with the third candle's high in case of a Down move or where the first candle's high does not overlap with a third candle slow in case of an up move with the condition that the middle candle has to be a large bed candle with little or no WIS but there can be some exceptions to this rule
46:17 which we will look at but first let's take a deep dive into this concept as I have mentioned just now these imbalances on price chart are visualized by a three Candlestick sequence containing one large middle candle whose bordering candles upper and lower wigs do not overlap now take a look at this example the middle candle is a large bearish candle with little or no pcks now number the candles as 1 2 and three from left to right then consider the first candle's slow and Mark a horizontal line out and do the same for the third candle's high and extend out and horizontal line you can notice that there is a clear gap between the wigs on the the first candle and the third candle and the Wicks do not meet or the high does not overlap with the low
47:02 therefore this can be identified as an imbalance or an inefficient price action or simply a fair value Gap now consider another example here the middle candle is a large bullish candle with little or no Wicks now number the candles as 1 2 3 from left towards right then extend a horizontal line from the first Candlestick high and do the same from the third candlesticks low and you can c clearly notice that the high and low Wicks do not overlap with one another so we can say this price action is inefficient or not healthy so this is a fair value Gap now let's take a look at some of the tricky situations which you could encounter in the charts on some occasions you'll not be able to apply this rule directly and you might need to
47:47 focus on some more important factors before clo a air value Gap observe this over here and tell me how will you mark the imbalances in this case case so if you look at this diagram this candle here is our last bullish candle or the last buying momentum before the price Str so most of you will mark this bearish candle's low which formed after the last bullish candle as number one and some people might even Mark the bullish candle low as number one and then Mark the third candle's high now in either case this is not a valid imbalance and why is it so if you look at the left side there is a bearish candle before this up move and you will notice that the high and low of this bearish candle is protected meaning that
48:32 the candles high and low are not broken by the up move so if the market creates anything between the high and low of this bearish candle all those moves are considered as internal BS only so in such scenarios first of all you have to check if the previous candles highs and lows are broken or not then only you have to number the candles as 1 2 and three so here this bearish candle has to be numbered one and this candle's low is to be marked or extended using a horizontal line the next candle which has broken the bearish candle low is our second candle and finally we will also Mark the high of the third candle now this becomes our valid imbalance which the market might return to fill or absorb so keep in mind that internal price moves are not to be
49:20 considered while marking proper imbalances now a lot of people will wait for the price to fill this particular imbalance and they will look for short trading entries but this is not a valid imbalance this would have been a valid imbalance if the market would have broken this bearish candle slow so now the bearish candle is no longer considered now when you mark the imbalance you can consider the bullish candle slow and number it as one but the next bearish candle is not taken into account because it is an inside candle which was unable to break the highs and lows of the bullish candle so our second candle in this case would be this bearish candle which has broken the low of the bullish candle and then the third candle high is also Mark and the
50:05 difference will become our imbalance now there can be another scenario when the high of the last bullish candle has been broken now how will you mark the imbalance in this case so here this bearish candle is no longer an inside candle and thus we can number it as one and Mark its low and subsequently we can number the other candles as two and three and mark the high of the third candle and thereby we can observe the imbalance I hope you guys have understood all these different scenarios now I want you to Mark the imbalances for these three scenarios on your own just pause the video and do it by yourself the answer will appear on the screen after 5 seconds so try it right
50:53 away so now that you have understood what a fair value Gap look like let's also make sure what it does not look like like before extend a horizontal line from the first candle's low and another line from the third candle High to see if there is a gap when dragging the high and low across you can see that they overlap this means that the low from the first candle is lower than the high from the third candle so there is no gap or inefficiency there and thus this is not a fair value Gap similarly over here if you were to extend the first candle's height using a line and also extend a line from the third candle's low you can see that there is an overlap between the first candle's High and the third candle's low meaning there is no imbalance or fair value Gap
51:40 so now just to clarify a gap between the first candle's low and the third candle's high or the first candle's high or the third candle's low is what creates a fair value Gap now I want you to find such imbalances or fair value gaps on different charts and mark them on your own by this simple method the next thing we are going to look at are CBS and BCS these are nothing new it's just the same concept in a new name and packaging just to induce curiosity so a CB stands for cell side imbalance and buy side inefficiency what does this mean it means that the sell side was offered but the buy side wasn't so it is inefficient or simply put it represents a bearish fair value Gap where the Bayers have or power the Bulls it is
52:27 also known as undervalued fair value Gap what it means is that the price of the asset is lower than its fair value Gap in this case the price might increase in the future to balance this inefficiency in price now a busy stands for buy side imbalance and sells side inefficiency this means that the buy side was offered but the sell side wasn't offered so it is inefficient or it represents a bullish fa value Gap where the Bulls have over powered the paays it is also known as overvalued pair value Gap what this means is that the price of the asset is higher than its fair value Gap now in this case the price might decrease in the future to balance this inefficiency so if you look at this price section right here we have a
53:14 bearish fair value Gap where the sell side is offered but the buy side is inefficient so this creates a CB if you look over to the right you can see that the price has made a bullish fair value Gap or a byy because it offered the buy side but not the sell side and that's all about BC and CB and I hope that clarifies some things for you guys now another relevant question worth asking is why do Market imbalances occur the emergence of persistent price imbalances in One Direction after long periods of stable or efficient pricing indicates that institutions are accumulating positions now these institution can be funds Banks and other Financial institutions that we call Smart money
53:59 but do keep in mind that the market is influenced not only by institutions but also by market makers investors and Traders with large capital for example smart money can place many orders and then modify or cancel them to bring the market back to an equilibrium State these market makers Traders and investors can oppose each other and they can also act in the same direction in most occasions imbalances in the market can occur after the release of an economic or geopolitical news the reasons can vary on whether you're dealing in Forex or in other markets could be the publication of financial statement for example a very positive quarterly report can lead to an imbalance towards buyers similarly it can be corporate announcement of
54:46 bankruptcy management changes takeovers business purchases Etc it could also be governmental and Regulatory actions interest R changes Etc which could contribute to the imbalance it could even be political problems natural disasters Etc now since you have understood what a fair value Gap or imbalances now you can ask me how is it useful for Traders like you and me now as mentioned earlier imbalances in the market can be viewed as inefficiency in price Behavior telling us that maybe Banks or big financial institutions are involved in the aggressive movements of prices that we are seeing again if you think about it most impulsive moves and imbalances in the market happen as a result of there being no liquidity in
55:31 the form of counter orders to stop the price from being met with resistance and thereby slowing down now if you consider an efficient market we get to see the price trade within a range of fair value for that particular asset where the sellers will sell when they perceive that the price of the asset is high or the price is trading at a premium and the buyers will buy when they purum that the price of the asset is low or is trading at discount this is not the case of an inefficient Market the big institutions will create a high momentum move and an imbalance in the market that is much like a gap in price in most cases this price manipulation can be a part of institution's plan to generate liquidity to buy low and sell high and therefore we may see the price coming
56:17 back to fill that imbalance or close the price gap before pushing back into the same direction that the price made the impulse move from and now to answer the question how can we as Traders benefit from such imbalances imbalance is a type of trading opportunity for both intraday and swing traders in trading imbalances are used to identify zones of Interest we will talk about these zones of Interest which is more commonly known as order blocks in the upcoming episodes The Zone from which the imbalance originated is characterized by a higher level of probability this zone is suitable for analyzing and identifying potential trade and risk points the entry points can be selected with the help of technical analysis within the selector trading methodology in this
57:03 case imbalances act as an additional factor in favor of the trade so naturally most imbalances in the market represents an inefficiency in price and therefore there is usually a good chance that the price will return to fill that imbalance in order to make the price efficient again now I cannot guarantee that the price will always come back to fill the imbalance but in most scenarios the price will return to fill the imbalances that form in the market because it is a rule of nature that everything wants to come to rest or to be balanced in the same way the price also wants to remain in Balance so when an imbalance is created the price tries to balance it and the imbalance gap between the wigs of the neighboring candles acts as a price magnet it means
57:49 that as the liquidity fills the price will close the imbalance this is what we call as mitigation in smart money Concepts or when we say that the price has mitigated the imbalance it means the imbalance has been filled and efficient price action has been restored and the market will most likely continue in the direction of the UL move but do keep in mind that mitigation is more a general term which can be used to indicate a filling of a price Gap filling of an order block Etc we will talk about this topic in more detail in the up coming episodes of this course as you are aware by now imbalances represent price in efficiency therefore there's a high probability that the market will come back to fill the imbalance for example if a large bidder has manipulated the
58:36 market a correction might occur afterwards typically price tends to mitigate the imbalance or the area from which it originated therefore we can look to take a trade in the direction of the imbalance in order to profit from the price movement in this way you'll be able to buy low and sell high like the institutions however there are times when the price will just continue to push back against the imbalance that are forming in the market I won't go deeper into the trading aspects of this concept in this video we will discuss different SMC trading techniques once we have covered all the basic concepts that guides the SMC Theory now I want to talk about some Advance Concepts regarding fair value gaps I won't force you to Lear this but it is worth knowing as it would help you
59:23 to trade with better conviction and accuracy now there are three things to look out for within a fair value Gap the first being the start of the fair value Gap the second being the consequent encroachment or the 50% of the fair value Gap and lastly where the price completely fills the fair value Gap we can make use of the Fibonacci tool to Mark these levels Within These fair value gaps when the price returns to the fair value Gap we should look for a few different things this will give us a better idea if the fair value Gap is respected by the price or or should it be considered invalid I will be considering a bearish fair value Gap or a CB for this purpose so first the price can either reach up into the fair value Gap but close outside the fair value Gap
1:00:08 and continue lower price can also reach up into the consequent encroachment or 50% of this fair value Gap in this case we would like to see the candle close outside the fair value Gap but as long as the price is respecting the consequent encroachment we can be pretty flexible with the price closing just below the consequent approachment sometimes the price can also reach up to fill the fair value Gap and in such cases it is preferable to see the price closing outside the consequent encroachment of this fair value Gap the most important thing to look for and invalidating a fair value Gap is where the price closes so when the price start to close over the consequent encroachment or outside of the fair value Gap it is an indication that the price is not respecting the fair value
1:00:56 Gap and most of the time price will not reverse back down and the CB is deemed invalid now let's look at a few examples to understand this concept better so we have a CB right here let's mark out the consequent encroachment using Fibonacci tool and see what happens so you can see when price reaches up into this fair value Gap does not close over the consequent encroachment or in other words price respect the fair value Gap and it is still valid for a reversal to happen now let's take look at another CB right here let's mark out the consequent encroachment you can see that the price did not respect the CB at all and close right through it this is when we will invalidate a fair value Gap because the price is not respecting it now if you
1:01:41 look at a bsy or a bullish fair value Gap right here and Mark out the consequent encroachment to see what happens the price reaches into the fair value Gap and closes out so it is currently respecting the BC and it is still deemed valid another case is when the price breaks out and close below the BC and in that case we can confirm that the price is not respecting the BC and it can be regarded as invar the next thing we are going to look at is fair value Gap inversion to explain this in simple terms inversion 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 what this means is that I would expect
1:02:26 price to return back to this old CB to use it as support and move away similarly price could return back to an old bsy to use it as a resistance and then move lower another thing to note is that this does not have to happen back to back meaning that this can occur later on after a period of consolidation let's look at some example to clear things up so we have a c right here and the price closes through it so it is considered invalid but that does not make it useless we can then look to see if the CB supports the price and we can clearly see that this old CB acted as a support for prices before getting a move higher here's an example of what I mean when I say that the fair value Gap inversion does not need to occur back to
1:03:12 back so we have considered another buy and right here we get a close below this fair value Gap so it is deemed invalid now let's see what happens when price returns to this old B you can see that the price returns to this old BC it uses it as resistance to go lower but this did not happen suddenly and the price took a while to return back to this BC for our next example we have a CB right here so let's see how the price reacts to it and you can see the price has filled this fair value Gap but the price closes out of it so it is currently respecting the CB but right after this we can see that the price closes over the CB invalidating it now let's see if an inversion happens when the price return and you can clearly see how the
1:03:59 CB was used as support when the price return so I think that clears a lot of questions regarding imbalances or fair value gaps you need to be aware that imbalances in chart create the fuel for the uptrending price movement however you should not mindlessly enter a trade in an imbalance Zone it is necessary that you use strong confluences and it is also necessary to monitor the context and make decisions based on it in this video we will discuss the most important Concept in the whole smart money concept approach or maybe it is one of the Keystone topics when it comes to trading as a whole it is none other than liquidity we retail Traders
1:04:44 like to get things done the easier way therefore we usually focus on indicator signals for taking trades we are least bothered about why the price moved in a particular manner that trigger the indicator to give a buy or a sell signal almost all indicators are derived from fundamental elements of the market which are price and volume further price and volumes are a result of the postprocessing of basic Market data so the point that I want to elaborate is that indicators can to some extent do a good job in generating winning trades
…
