Smart Money Market Structure

In this article, I am going to discuss Smart Money Market Structure Trading Strategy i.e. the Core Concept of Smart Money Trading Method with Examples. This concept divides into 3 parts. They are as follows:

SMART MONEY CONCEPT

1. Supply and Demand
2. Order Block

SMART MONEY MARKET STRUCTURE

1. SD FLIP
2. CHoCH
3. BOS

SMART MONEY ENTRY TECHNIQUE

1. Liquidity Hunting
2. Inducement

In our previous article, we discussed Order Block Trading Strategy and discussed the following pointers.

1. What Are Order Blocks?
2. Things to Consider When Using the Order Blocks Forex Trading Strategy
3. Order Blocks Forex Trading Strategy – Pros and Cons

In this article, we are going to discuss the second part i.e. Smart Money Market Structure Trading Strategy.

Smart Money Market Structure Trading using Order Block

It is the map that will help to understand and predict the next movement and it will make you understand where you are, whether are you in correction or Continuation. Now, we will discuss the market structure. Market Structure generally decides who is in control because we want to take entry into the controlling side. Smart money method basically the backbone of two things market structure and liquidity.

When a large trader or institution takes a large position in a particular asset or market, its actions can have a significant impact on the supply and demand dynamics, leading to changes in price and market direction. For example, if a large institutional investor decides to buy a significant number of shares in a particular company, this can lead to increased demand for the shares, driving up the price. Similarly, if a large trader takes a short position in a particular market, this can lead to a decrease in demand and drive the price down. Same as we analyze trends.

1. Uptrend Demand in Control
2. Downtrend Supply in Control

3 Things we look at before Entering are:

Step 1: Identify the Trend of Market

The first step in creating a trading strategy based on order block is to identify the market trend you want to trade. Look at the overall market structure (Higher Highs and Higher Lows or Lower Highs and Lower Lows. Bearish or Bullish). Market structure gives us bias for trading opportunities. In the bull market, we always look to buy

Step 2: Identify Key order block Zones

Once you have identified the market trend, the next step is to identify key bullish or bearish order block zones. These zones are areas where there is a significant imbalance between supply and demand. Look for bullish or bearish order blocks according to the higher timeframe trend. So, if the higher timeframe trend is a downtrend, then you would look for a bearish order block and if you are in a bullish market then you would bullish order block

Step 3: Entry and Trade Management

Look at the lower time frames and look for the lower time frame confirmations

As you can see the market is in a downtrend making a lower low and lower high. Valid bearish order blocked formed. Wait for any bearish sentry at the OB zone. OW check below the updated chart.

Summary till now

1. Market Structure who is in control
2. Order Block (location of entry)

Before starting first clear some basic components of trends or market structure

Principles of Smart Money Market Structure in Order Block Trading

Price moves within a structural of support and resistance. A breakout of the structural of support or resistance will lead to price movement in the next area of the support or resistance.

Strong Low (SL)

When the price broke market structure was high. the low point becomes a strong low. Strong Low is The Low that caused Manipulation and Break Structure (resistance).

Weak High or Low

Fresh high in an uptrend and fresh low in a downtrend. Weak Low/High is the Low that fails To Break Structure (WEAK HIGH OR LOW PRODUCED ALWAYS FROM A strong High or Low).

• For every strong LOW, there is a weak High
• For every strong High, there is a weak Low

When Does Supply/Demand Break?

After a zone is tested many times or during a strong move, Supply and Demand levels eventually break. Due to the remaining orders being triggered and gradually removed, or an overwhelming number of orders in the opposite direction breaking the level.

Different Types of Smart Money Market Structures in Order Block Trading Method

Phases of Market Structure

The price goes through 4 Phases

1. ACCUMULATION
2. UPTREND
3. DISTRIBUTION
4. DOWNTREND

Based on the Phases 3 entry structure

1. Break of market structure in uptrend or downtrend
2. Supply-demand flip or change of character in a trend reversal

Uptrend and Down Trend

Trend gives us bias for trading opportunities. In the bull market, we always look to buy dips.

Break of Market Structure

On any Timeframe, once we see a break and close of a candle beyond the structure (swing high in an uptrend and swing low in a downtrend) this is called a break of structure, very simple we have broken the old structure and created a new structure. Break of the structure formed in a trend continuation.

Here are the basic steps for implementing the Continuous Order Block Entry Method

Step 1: Identify the Market Structure and wait for the break of the market structure

The first step is to identify the market structure by analyzing the highs and lows of the price. The first step in creating a trading strategy based on order block is to identify the market you want to trade. Look at the overall market structure (Higher Highs and Higher Lows or Lower Highs and Lower Lows. Bearish or Bullish). Market Structure gives us bias for trading opportunities. In the bull market, we always look to buy

Traders should then watch for a break of the market structure. This could occur when the price of the asset breaks through a key support or resistance level, or when the price forms a new high or low that is outside of the current market structure. Confirm the Break with Volume To confirm the break of market structure, traders should also look for an increase in trading volume. This can provide additional confirmation that a shift in market sentiment is occurring and increase the likelihood of a successful trade.

Step 2: Identify Potential Order Blocks

Once the market structure has been broken, traders can then look for potential order blocks. Order Blocks are footprints left by the market when an impulsive move occurs. Order Block (OB) is the last opposite candle before the strong move that creates an imbalance in the market. Once you have identified the market, the next step is to identify key bullish or bearish order block zones. These zones are areas where there is a significant imbalance between supply and demand. Look for a bullish or bearish order block according to the higher timeframe trend (So, if the higher timeframe trend is a downtrend, then you would look for a bearish order block and if you are in a bullish market then you would bullish order block

Step 3: Enter or Exit Positions

Look at the lower time frames and look for the lower time frame confirmations. One order block has been identified after the market structure break. Enter the trade: Once the order block level is confirmed, enter the trade in the direction of the order block, placing a stop-loss order at an appropriate level to limit potential losses in the event of a market reversal. Manage the trade: Once the trade is open, monitor it closely and be prepared to adjust your stop-loss order and exit the trade if necessary. For additional confirmation can use the confluence factor any indicator

As you can see the market is in a downtrend making a lower low and lower high. Valid bearish order blocked formed. Wait for any bearish sentry at the OB zone. OW check below the updated chart.

Here is another example

Here is another example

Change of Trend (Accumulation or Distribution)

It involves identifying key supply and demand zones on a price chart and waiting for a price flip or change in the trend to occur at those zones, which can signal a potential reversal. When this structure is broken, it can indicate a shift in market sentiment and provide opportunities for traders to enter or exit positions.

How Does Trend Change? From Bearish to Bullish

• Stopping action (stopping the downtrend) or weakness in the trend
• Change of behavior in range (strength of trend changes from bearish to bullish in terms of candle and volume)
• Testing of supply (testing supply whether present or not)
• Break of market structure (if no supply found in testing action)

Now let’s start all reversal market structures in detail.

Supply Demand Flip

• Price created a new high (market structure bullish demand in control)
• It tested the last demand zone (OB zone) but the price take a technical bounce from the demand zone instead of actual buying, but could not create a new higher high in the uptrend.
• Instead of creating a higher high in the uptrend, it broke through the last demand zone. Supply in control leaving a supply zone behind
• When the price retests the supply zone we will sell.

Step 1: Identify the Market Structure (and supply and demand zone)

1. Identify supply and demand zones: The first step is to identify key supply and demand zones. Supply zones are areas where there is more selling pressure than buying pressure, while demand zones are areas where there is more buying pressure than selling pressure.
2. Wait for the price to reach a supply or demand zone: Once supply and demand zones have been identified, wait for the price to reach one of these zones.

And wait for the flip of the zone

1. Look for a price flip: Once the price reaches a supply or demand zone, look for a price flip or change in the trend to occur. This can be a reversal of the trend, where an uptrend changes to a downtrend or vice versa.

Traders should then watch for a break in the market structure. This could occur when the price of the asset breaks through a key support or resistance level, or when the price forms a new high or low that is outside of the current market structure. Confirm the Break with Volume To confirm the break of market structure, traders should also look for an increase in trading volume. This can provide additional confirmation that a shift in market sentiment is occurring and increase the likelihood of a successful trade.

Step 2: Identify Potential Order Blocks

Confirm the order block level: Once the price flip has occurred, look for confirmation of the order block level by waiting for the price to return to the level and bounce off. Once the market structure has been broken, traders can then look for potential order blocks. Order Blocks are footprints left by the market when an impulsive move occurs. Order Block (OB) is the last opposite candle before the strong move that creates an imbalance in the market. Once you have identified the market, the next step is to identify key bullish or bearish order block zones. These zones are areas where there is a significant imbalance between supply and demand. Look for bullish or bearish order blocks according to the higher timeframe trend. So, if the higher timeframe trend is a downtrend, then you would look for a bearish order block and if you are in a bullish market then you would bullish order block

Step 3: Enter or Exit Positions

Look at the lower time frames and look for the lower time frame confirmations. One order block has been identified after the market structure break. Enter the trade: Once the order block level is confirmed, enter the trade in the direction of the order block, placing a stop-loss order at an appropriate level to limit potential losses in the event of a market reversal. Manage the trade: Once the trade is open, monitor it closely and be prepared to adjust your stop-loss order and exit the trade if necessary. For additional confirmation can use the confluence factor as an indicator.

1. Enter the Trade: Once the order block level is confirmed, enter the trade in the direction of the price flip, placing a stop-loss order at an appropriate level to limit potential losses in the event of a market reversal.
2. Manage the Trade: Once the trade is open, monitor it closely and be prepared to adjust your stop-loss order and exit the trade if necessary.

Change of Character

1. BOF/TRAP. They face strong supply, then the price broke the untested lower time frame demand zone instead of bounce or reversal, and each near 2^nd demand zone
2. AR BMS (STRNG SUPPLY IN UPTREND) Supply in control leaving a supply zone behind
3. TEST OF OB. When the price retests the supply zone we will sell.

This pattern form near a higher time frame supply/demand zone .as the name suggests it involves shifts in market sentiment and momentum by looking for changes in the structure of price action on a price chart

1. Identify untested higher time frame supply/demand zone and observe the price action around those levels. Look for signs of change in the character or behavior of the price action, such as the shift in the direction of the trend
2. Identify potential order blocks: Order blocks are areas where large institutional traders may have placed buy or sell orders, leading to significant price movements.
3. Confirm the order block level: Once a change in character is observed, confirm the order block level by waiting for the price to return to the level and bounce off it or consolidate around it.
4. Enter the trade: Once the order block level is confirmed, enter the trade in the direction of the change in character, placing a stop-loss order at an appropriate level to limit potential losses in the event of a market reversal.
5. Manage the trade: Once the trade is open, monitor it closely and be prepared to adjust your stop-loss order and exit the trade if necessary.