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SMT - The Right Way
SMT - The Right Way
Basically, highs and lows, between different pairs that are alike, have
discrepancies in terms of price action. One high is broken and the other pair not
having the strength to break the high. What in turn happens? A massive move.
Example: we see price did have the strength to break through the low on
S&P500. This is early in the NY session. 20 mins after the opening bell.
Next pair…
We can see here that on Nas100 price has had the strength to break through the
low. It happened very quickly and that is known as divergence.
Don’t be fooled though. You may feel the need to look for these every day. You
may find them every day…. but you need to remember a particular set of rules
that distinguish strong divergence from weak divergence. The difference is the
quality of the setup. We only shoot for high-quality setups remember.
1. There will be one pair that breaks a high or a low. If you’ve learned
anything about SMT from your favorite “guru” it was to take the pair that
has yet to break structure. Does that make any sense?? You want to buy
and sell after liquidity grabs not before. There could always be a chance
that that pair runs liquidity and invalidates the divergence because time
distortion is real.
2. You want to see a quick movement after the high or low is taken the
opposite way. Many can get in at this time and see a profit…I hope they
bring their stop loss to break even immediately.
3. That brings me to my next point. Be patient. Price will react quickly after
taking that low or high but often will return back to it. Retail language would
call it a retest. But what we’re looking for is an order block or fair value gap.
That is our entry. Stop loss goes below the low or high and watch that girl
rip. As always stop loss to break even as soon as possible with such a
volatile fast movement such as divergence.
This is the setup… Executed perfectly… This is how you would make the
most out of the days you see these discrepancies.