Euro / U.S. DollarEducation
Smart Money and the why behind it
I have used TradingView for near enough 10 years now. What I like about the platform is the simplicity and the tools.
I often get asked about things like strategy or other people's techniques - "What do you think of SMC or this guy or that guy"
Look, when it comes to trading - Liquidity is something very little people understand. Gurus talk about it and draw pretty lines but still fail to break it down as to why it's there in the first place.
"Ah it's where the big boys buy or sell"
so to help visualise this lets use some of these tools here on Tradingview.
Look at my first chart here;
What I have done is jumped up a timeframe and placed a volume profile tool on my chart, then simply used the drawing tool to draw a squiggle around the relevant nodes.
I then dropped back to the smaller timeframe and switched on a couple of indicators to help visualise where the liquidity is.
if you look at the lines 15minutes and 30minutes both in green and cast your eyes to the right, can you see they sit just below (as price is coming from above) to those higher volume nodes from that higher timeframe?
Let's use another tool here on TradingView;
This one is called a fixed range volume profile.
the two blue lines extended out are known as the value area high and low. Often this is set to around 70-75% but I like to reduce that a little. The red line is called a PoC or point of control. This basically means the highest transactional point of the range you fixed.
However, if you look over to the left this time you will see two higher volume nodes (mountains) and therefore look at the 15m and 30m lines again with fresh eyes.
In this next image I have increased the range and dragged it over to include more data. I could write full strategies on this tool alone.
The first thing you should notice is the PoC has now jumped up higher. Think logically about this for a second.
We are seeking lower timeframe liquidity down low and the area of interest and value is showing price was accepted up high.
So, after grabbing liquidity, would we anticipate the price to continue down lower or come back to play in the accepted zone?
This is where a lot of newer traders fail, especially when trading smart money concepts "SMC" for short. They fail to understand the bigger picture.
Another little tool in the same box-set is the Timeprice indicator.
Much like session volume this gives a pretty clean view and of course settings can be adjusted. I like the look on this one, it's very modern. But the real value isn't until you zoom in and zoom in and you see why it's called Time - Price. I'll leave that for another post.
But continuing the theme of this post; look at the clusters of the time price indicator and note where the PoC sits on the 15m liquidity level. Then below the 30m liquidity is the lower side of the value area. Are you starting to see a theme?
In this last image; I have simply highlighted liquidity to keep my chart clean.
You will see candles showing the last buys before the selloff. Then a consolidation under the liquidity - this is basically a Wyckoff structure prior to a mark down move.
We then drop into the liquidity pocket and here is where most SMC traders would be jumping long. We see a very nice little rally, then a large fast drop through the liquidity, this hitting many stops and triggering new short positions.
which is why as these shorts get triggered, you anticipate the pullback - to what level? Well look left and the charts will tell you.
I hope this has opened a few eyes - go away and have a play with these indicators on TradingView and feel free to aks if you have any questions.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years' experience in stocks, ETF's, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Note
You see how it is used...
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.