Why does it always go against you? You might be new to trading, you may have several years of experience. But, where a lot of people still seem to go wrong is in not realising the relationships.
I have posted hundreds of educational posts here on Tradingview from cartoons, trying to simplify techniques through to market relationships between technical systems such as Elliott Wave and Wyckoff.
Many new traders fall foul of social media posts covering "SMC - Smart Money Concepts" and are not seasoned enough to appreciate what or why these can work for some and not for others.
You have Elliott Wave traders, there is a saying along the lines of "if you put 10 Elliott traders in a room searching for a wave count you will come out with 11 different answers"
This isn't to say Elliott doesn't work, nor Smart Money.
The market seeks liquidity, it forms seemingly complex patterns that humans try to make sense of. We are great at that, seeing patterns even if they are not there. - Look, there's an upside-down butterfly 1.618 extension!
First, you need to appreciate Elliott Wave counts on smaller timeframe are pointless, especially in the age of algo's and bots. However, sentiment on the larger timeframes can't really be spoofed.
In this first image; you can see a market wave that is straight out of a textbook.
Let's also add some Wyckoff; if you were to visualise this - Wyckoff schematics would be visible on smaller timeframes, the Green boxes represent accumulation and the Red show distribution.
Let's overlay and Elliott Wave count -
Take that to the next level, this count is only part of a higher fractal count.
How does this fit into smart money concepts? well, it's more like - How does Smart Money fit into this?
Elliott waves and Wyckoff have been around for over 100 years. Many of the techniques shown on YT video's today can be traced back to these older concepts.
Now, if you can see how a 1-2 EW count pushes up for a 3. You can zoom in again and start to see what to expect when trading using SMC.
In this image you can see a drop, then a gap as price pushes back up (I haven't bothered drawing wicks for simplicity assume their inside the box)
Many traders would now anticipate a move that looks something like this.
Only to see price do this
Yeah - you're not the only one!
The next issue is where and how Supply and Demand is drawn.
Ok, the gap didn't hold, it must be the demand level there. GO AGAIN!!!
How did that play out? Trade 1, Trade 2 =
What about now?
Price holds the support
This time you are afraid to go in. Then one of two things happens.
1)
Or
2)
In the first image, we can see a sweep of prior liquidity and that creates momentum for a move up. In the second image, price simply melts away.
This is an easy fix. It all comes down to understanding what the charts are trying to tell you.
People love to talk about how "Smart Money" is the banks and institutional players - how they are playing against you on every click of the button.
The truth is, most people don't understand the market.
When larger players enter the market, the can leave a pretty obvious footprint. In addition to that - they leave behind orders they had but were unable to fill. These orders they will be defended with even more buying or selling (if they need to), and this is the premise for a rally and pullback or a drop to pullback.
Now, visualise a 1-2 Elliott Wave move. Why do you think 2 often comes back so deep?
What would you expect the move from 2-3 to do?
Powerful push, yes?
In this image, the move that created demand is simply the opposing colour candle before the power play. The significant move pushed up (showing institutional involvement). Hence, a location they will likely defend.
In addition to the push up, they pushed with so much money - it created a natural gap.
This type of example doesn't always have to be a power play 1-5 up, it could be visualised on pullback moves too.
Here's a great example recently on Euro.
The demand candle 'buy before the sell" is clearly targeted on the way up. Price fails to close above it, drops, goes back to retest - sweeps and drops. If you were to zoom in you will see on smaller timeframes evidence of a Wyckoff schematic with a UTAD.
Add a volume profile there.
As the price breaks above, after it's pullback you can see an acceleration in price and of course the area has the PoC.
Back to where people go wrong.
They will see this GAP created and assume price will come back here to reject and go. However, look closer and the demand that started the move is very near that gap.
Where is the juicy liquidity? PoC is another little clue.
Let's take this to another level.
In this image I have a range, using the prior high just to give the example in this post.
We are in an uptrend = we just broke the high, we expect a Pullback. Where would that likely target?
Zoom in again. This time I have added a fixed range volume tool.
What do you know?!
Anyways, once you get a handle on the bigger picture and understand the relationships, you can zoom into any timeframe you like - the game is always the same.
Have a great week all!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principal trader has over 25 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.
