SMT Divergence Lecture Notes

Introduction

• Questions can be asked at the end of the presentation or on Discord.
• Join the free community on Discord for detailed help.
• SMT Divergence is essential in ICT strategy.

Definition of SMT Divergence

• SMT stands for Smart Money Tool.
• Price signature when correlated markets don't move in tandem.
• Indicates institutional sponsorship/manipulation in markets.

Prerequisites

• Understanding of basic market structure (higher highs, higher lows, lower lows, lower highs).

Concept of SMT Divergence

• Correlated markets should move in tandem.
• Example when there is no SMT Divergence: Both markets make higher highs/lower lows simultaneously.
• SMT Divergence occurs when one market fails to mirror the movement of another (e.g., one makes a higher high, the other makes a lower high).

Significance of SMT Divergence

• Indicates bullish/bearish price action.
• For index futures: NQ, ES, YM (consider DXY for longer-term correlation).
• For Forex: EU, GU, DXY (DXY is inversely correlated).

Importance of SMT Divergence in Trading

• First sign of institutional sponsorship in markets.
• Occurs at the beginning and end of every trend, indicating market reversals.
• Helps in spotting accumulation/distribution phases.
• Indicates markets are ready to expand.

Application of SMT Divergence

• Look for SMT Divergence within higher time frame key levels.
• Used to spot phases within Market Maker Models.
• For bullish scenarios, look for SMT on the lows. For bearish scenarios, look for SMT on the highs.

Examples and Practical Use Cases

• Example 1: Market Maker Buy Model
  • Identify original consolidation and distribution phases with SMT.
  • Use SMT Divergence to trail stop losses.
• Example 2: Market Maker Sell Model
  • Original consolidation and distribution confirmed by SMT.
  • Use SMT Divergence for smart money reversals and accumulation phases.
• Example 3: High Probability Setups
  • Higher time frame Market Maker model with lower time frame Market Maker models within.
  • SMT Divergence aids in capturing high/low points efficiently.

Summary

• SMT Divergence occurs at significant market turning points and offers high probability entries and exits.
• Use HTF context to confirm SMT Divergence on lower time frames.
• Essential for analyzing and predicting market behavior accurately.

Closing

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