SMT Trading Concepts

Overview

This lecture covers the concept of SMT (Smart Money Technique) in trading, focusing on how to identify true and fake SMT signals, the importance of strength switching, and strategies for trading correlated assets.

Introduction to SMT

• SMT involves comparing price movements between two correlated markets.
• A typical SMT setup appears when one asset takes out a key high/low, but the other doesn’t, hinting at a possible reversal.
• Proper SMT analysis helps avoid false signals and improves trade accuracy.

SMT Structure & Key Concepts

• True SMTs require both assets to expand away from the sweep, not just one.
• The asset that sweeps must reverse and “catch up” in strength to maintain correlation for expansion.
• Strength switching is essential: it means the previously weaker asset becomes stronger after the SMT event.
• Larger price gaps, differences in retracement depth, and order of swing points can indicate strength switching.

Types and Filtering of SMTs

• True SMT: Confirmed when both assets expand away from the sweep.
• Lagging Asset SMT: Occurs when the asset that sweeps does not reverse; often signals a fake SMT and a potential target for further movement.
• Failure Swing SMT: Seen when an asset sweeps many failure swings in consolidation—usually results in continuation, not reversal.
• Fake SMT: Identified when certain conditions (like unfilled wicks or non-expanding moves) are present; these are low-probability trades.

Two-Stage SMTs

• Two-stage SMTs involve confirmation across different timeframes or ranges (e.g., daily followed by intraday).
• Two-stage setups are more reliable if accompanied by strength switching.
• Lower probability if the first SMT doesn’t immediately result in reversal—wait for a strength switch before entry.

Practical Examples & Trading Tips

• Watch for price gaps, retracement differences, and swing point behaviors to identify strength switching.
• Confirmation through fractal analysis and multiple timeframes adds confidence.
• Adjust targets and expectations based on the quality and probability of SMT signals.
• Prioritize two-stage SMT setups and strength switches for higher confidence trades.

Key Terms & Definitions

• SMT (Smart Money Technique) — Comparing correlated asset moves to identify reversals or continuations.
• Strength Switching — When an asset temporarily overtakes another in bullish/bearish strength after an SMT.
• Lagging Asset — An asset that fails to reverse after an SMT, signaling continuation.
• Failure Swing — A price swing that fails to break previous highs/lows, creating liquidity traps.
• Two-Stage SMT — An SMT setup confirmed by a second SMT on a different timeframe or price range.

Action Items / Next Steps

• Practice identifying SMT and strength switching on correlated asset charts.
• Review candle and swing point profiles for better recognition of real/fake SMTs.
• Await further lectures for advanced SMT concept breakdowns.