Profitable Multiple Time Frames Smart Money Strategy For Trading
In this post, I will share with you a very accurate and profitable SMC Smart Money trading strategy that combines top-down analysis, liquidity, imbalance, order block and inducement.
Step 1 - Identify liquidity zones on a daily
Liquidity zones are the areas on a price chart, where big players are placing their orders. From such areas, significant bullish and bearish movements initiate.
Liquidity zones that are above the current price will be the supply zones, while the liquidity zones that are below the current price will be the demand zones.
We will look for shorting opportunities from supply areas and for buying opportunities from demand zones.
Here are the liquidity zones that I identified on EURJPY.
Step 2 - Wait for a test of one of the liquidity zones
Let the market test the liquidity zone.
For buying, the price should reach a lower boundary of a demand zone.
For shorting, the price should test an upper boundary of a supply zone.
I underlined the exact levels that the price should test on EURJPY.
Here is the test of the lower boundary of the demand zone.
Step 3 - Look for inducement on an hourly time frame
With the inducement, smart money make the market participants think that the liquidity zone that the price is testing doesn't hold anymore.
When the price tests a supply area, an hourly candle close above its upper boundary will be a bullish inducement.
With that, the smart money incentivize buying orders.
When the price tests a demand area, an hourly candle close below its lower boundary will be a bearish inducement.
With that, the smart money incentivize selling orders.
The price closed below a lower boundary of a demand zone on EURJPY on 1H time frame.
Step 4 - Look for imbalance on an hourly time frame
After a violation of a supply area on an hourly time frame, look for a bearish imbalance.
Bearish imbalance is a strong bearish candle with wide range and big body. With that candle, the market should return within a supply zone and closed within or below that.
After a violation of a demand area on an hourly time frame, look for a bullish imbalance.
Bullish imbalance is a strong bullish candle with wide range and big body. With that candle, the market should return within a demand zone and closed within or above that.
Here is the example of a bullish imbalance on EURJPY.
After a bearish inducement, the price formed a high momentum bullish candle and closed within the demand zone.
The imbalance signify that a liquidity zone violation was a trap .
With that, smart money simply was trying to grab the liquidity.
That will be a signal for you to open an order.
Step 5 - Look for an order block
After the formation of the imbalance, the market becomes locally week and quite often corrects to an order block.
Order block will be the closest hourly liquidity zone.
After a formation of a bearish imbalance, look for a supply zone on an hourly time frame. That will be your perfect zone to sell .
After a formation of a bullish imbalance, look for a demand zone on an hourly. That will be your area to buy from.
Here is the order block on EURJPY.
Step 6 - Set a limit order
Set a sell limit order within a supply area after a formation of bearish imbalance on an hourly time frame.
Set a buy limit order within a demand area after a formation of a bullish imbalance on an hourly.
Here is your buy entry level on EURJPY.
Step 7 - Select the target
If you sell, your target should be the closest daily structure support: horizontal or vertical one.
If you buy, your target should be the closest daily structure resistance: horizontal or vertical one.
In our example, our closest structure resistance if a falling trend line.
Step 8 - Set stop loss
If you sell, stop loss will lie above a bullish inducement.
If you buy, stop loss will lie below a bearish inducement.
Here is a perfect point for a stop loss for a long trade on EURJPY.
Step 9 - Trade
Let the price trigger your entry, and then be prepared to wait.
It took many days for EURJPY to reach the target.
Trading Tips:
1. Make sure that you have a positive reward/ratio. It should be at least 1.2
2. Risk no more that 1% of your trading account per trade
Being applied properly, that strategy shows 70%+ accuracy.
Try it by yourself and let me know your results.
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