Elements to a Trade Set up 5: SMT Divergence how smart Money is accumulated and distributed. The Leading indicator in Price, based on ICT Concepts. Take notes βπΎ and share.
To be begin with SMT means Smart Money Technique, it was coined by ICT and the term is exclusive to him regardless of what people say all credits go to ICT. Do not confuse SMT Divergence with RSI divergence the two are different.
SMT tends to appear at beginning of sessions Asia, London and New York. It is in fact a change in flow of money where the algorithm books the market it is also a warning sign of things to come. There are also 2 SMT divergences that traders should be aware of.
The first being in the case of Indexes to determine bias we must look at DXY dollar for USA πΊπΈ Markets. The dollar index DXY shows where is the flow of money. ICT says Risk On or Risk OFF. If DXY is going down then Indices Markets are going up. See picture bellow ππΎ
It is highly advised that before u even think about trading the indexes like Nas US30 and S&P you first take a look at DXY Dollar π΅ this is to help with Daily Bias. The second SMT is between the 3 indexes themselves Nasdaq US30 and S&P.
Write βπΎ this down a key rule there 2 of them will follow each other and the third will be slow to react. Never all 3 at once. This is called leading index and delayed index. This is because buyers are loading up on one and the other two are facing distribution to the upside.
This is in the case that we are meant to go up on the day. Now here is a key concept SMT divergence between the indexes is known as Accumulation and Distribution. This means that if one is slow to react the other 2 are already being distributed. See picture bellow ππΎ
In todays example S&P 500 and US30 already left and they faced heavy distribution so flew off straight away. Nasdaq was being accumulated the algorithim was picking up orders at much lower levels. To be exact at discounted prices at 11980-970 levels.
Last key point on episode 8 of ICT mentorship ICT talks about SMT divergence as accumulation and Distribution. He later also said that traders have a choice to go with faster moving index as in the ones already taking off. But the choice is with the trader.
It is a matter of personal choice but we have found that the index that is being accumulated has the best value for money to offer as itβs move will be better in terms of pay. So as a general rule we will always go with Accumulation rather then distribution.
If u canβt wait to find the level they are accumulating it is best advised to go with the distributed pairs. As that is an easier trade.
Last bonus point on days that there is a choppy Market you will see double SMT one above and one bellow on the WITHIN THE SAME INDEX, when comparing to another index. Avoid both indexes and donβt trade. Hope you find this useful & the matter is clarified. Good luck π
Loading suggestions...