Notes
- We monitor divergences (Smart Money Technique) between correlated assets or markets.
- This technique is useful for identifying significant price movements.
- In a symmetrical market, a lower low in the foreign currency (e.g., Aussie Dollar) should correspond with a higher high in the dollar index.
- If this correlation breaks (e.g., the dollar index fails to make a higher high while the Aussie Dollar makes a lower low), it indicates underlying distribution in the dollar index and accumulation in the foreign currency.
- Examples of bullish divergences (SMTs):
- The dollar index fails to make a higher high while the Aussie Dollar makes a lower low.
- The dollar index makes a higher high, but the Aussie Dollar fails to make a lower low.
- Examples of bearish divergences (SMTs):
- The dollar index fails to make a lower low while the Aussie Dollar makes a higher high.
- The dollar index makes a lower low, but the Aussie Dollar fails to make a higher high.
- Two basic approaches to SMT trading:
- We look for divergence after the market has removed a significant liquidity pool.
- Michael also refers to the SMT as the institutional market structure.
- Smart Money Technique is also known as Smart Money Tool.
ICT Smart Money Technique
AUDUSD SMT Example - Weekly Chart
AUDUSD SMT Example - Daily Chart
AUDUSD SMT Example - Liquidity Pool
AUDUSD SMT Example - Accumulation And Distribution
AUDUSD SMT Example - Optimal Trade Entry Opportunity
GBPUSD SMT Example - OTE And Turtle Soup Opportunity
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