SMART MONEY TOOL DIVERGENCE STUDY FOR SWING AND DAY TRADES

When we study correlation we expect to see it being respected.

If you have been studying ICT concepts you would know that we use those times when correlation
doesn’t seem to be respected to hunt for short term swing trades and or day trades. We call this a
crack in correlation or Smart Money Divergence Tool (SMT Divergence).

There is observable divergence from 31/01/2019 to 28/02/2019 for EURUSD and GBPUSD as shown
in the chart below.

We expect all XXXUSD pairs to make HH/LL at the same time according to correlation but when to
look at the chart above, it can be seen that we have a crack in correlation – Divergence. As the
EURUSD made a LL, GBPUSD made a HH.

Therefore we want to zoom in the GBPUSD in the area highlighted in the chart below. I chose
GBPUSD for this study but you can choose either for yourself.

Remember we are hunting for shorts. Trade with the trend. The trend is your friend.
By zooming in, we want to see if inside that highlighted small section of price action we can find
something to base our trades from.

Below is a zoomed in 4 hour chart for GBPUSD.

Wow, look at that BMS – Break of Market Structure. Once we see that, we can either be
conservative or be aggressive. If you are conservative you will wait for the market to break the new
LL and try to find an entry on either its retest or fib level or order block test.

We are going to be aggressive and see how taking trades from the first leg that broke structure looks
like. For better clarity let’s look at the more zoomed in 1 hour chart below with some fibs anchored
in too.

Look at that! There is you Sweet Spot 61.8 fib entry or order block fair value repricing entry.

The price has been discounted. There is absolutely no drawdown on this trade even if it’s aggressive
off of the first BMS leg.
You could have found more and more trades using the simple fib tool stalking prices to go lower.
Just take a look at the following chart for more swing trades that you would have captured. Imagine
you could have captures only one trade from all of these. Remember we don’t trade every day. Do
your best to cherry pick one or two trades and milk them hard.

I skipped two more trades in this chart otherwise it would have looked messier that it looks already.

I have not forgotten about day traders, those who loves not holding on to trades that span to the
next day. Well I have something for you too.

Looking at the chart below, I have noted all possible places we could have taken swing trades using
the fib tool.

We want to zoom in and study these very same areas in a 15 minute chart and use the ICT Judas
swing and see how you would have capitalised on the range expansion for some beautiful pips and
probably with a tiny 10 – 30 pip stop.
Look at the 15 minute zoomed out chart below.

This is very beautiful. Since we are hunting for shorts we expect a stop hunt high drop for about 10
to 20 pips.

The green boxes are the range expansions and possible pips pay outs. Only one trade wasn’t going to
work out.

NB: For more detail about ICT Concepts you can learn from a lot or resources shared in this group or
other telegram groups alike. Also if you use BTMM Steve Mauro, Throw in some Mayo, Water, Male,
catchup, TDI etc and see the magic. It will resonate with this naked analysis.

Thanks Folks and Happy Trading.

Analysis and Study by:

Aurthur Musendame

(Zimbabwe)