Haha you seem pretty pumped. Problem is that when you feel like that, it’s really hard to take a loss sometime! And that only applies to real money situations mostly
[U]Questions regarding SMT divergence[/U]
If EURUSD is making lower low but GBPUSD fails to make lower low, this is a bullish divergence. Assuming that this occurs at a key support level, which pair would make a bigger rally up?
A little weekend analysis. Anyone else find next weeks traders trinity interesting?
Sorry about the s/r lines weekly trinity is bold extending to the right.
The idea is to buy the weaker pair (whichever makes the lower low). Please correct me if I’m wrong.
thanks for the link. the video Higher Time Frame Analysis Part 2 has a choppy audio and at some point no audio at all. anyone has a better version of this video? thanks.
Why would you think that? The logic answer would be the one making higher lows , which denotes more buying power. Why would you buy the weaker pair? Only cause it seems it has a “longer way to go” ?
This is how I’d always thought was the correct way to trade SMTD. As long as a higher TF OTE or other criteria support the trade. When one trades lower or higher than the other pair it usually is reaching for support or resistance level (pocket of stops) this is why my main deciding factor is S/R levels.
As ICT likes to say “you can be wrong and still make money”. Even if this is completely opposite to how SMTD is supposed to work it seems to be working for me. Though if it is wrong it would be great to get confirmation.
Here an example from Thursday that support buying or selling the weaker pair. The screenshot is EUR/USD. Here Fiber makers a higher high in SMT Divergence. The second screenshot is GBP/USD making a lower high in SMT Divergence thus the weaker pair going short.
Fiber
Cable
Other confluences:
Cable provided a Judas as well as an OTE from the previous day (look at June 27 & 28).
OTE occurs at R1 of the Daily Pivot Calculator
Tighter Asian Range on Cable
End Result:
Larger daily range from Cable and more opportunities to get short. I did trade Cable here and hit profit target at 60 pips which would have triggered on either pair. This is not always the case. I don’t remember exactly what ICT said on this but my take is the more confluences lining up in your favor equates to a higher probability trade. Even if I was not looking at SMTD, I still would have considered the trade given the other information. I did get stopped out from late Judas. However, I realized that the other confluences lined up on R1 so I reentered confident that SMT Divergence was correct in telegraphing the banks’ move to buy the US dollar.
I hope that helps.
Cheers…
i think there is a bit of mix up there…both cable went from a low high to a higher high and fiber also went from a lower high to a higher high in the pictures given …
therefore in both the pictures there was no divergence in the circled areas.
look better Brink…
on the kill zone 7am/ 9am tipycall time when market seems to like making judas, there is a huge divergence where Pound is making new high of the day and euro is slightly down and not making a new High of the day… so divergence is presente clearly whtout any doubt.
when talking on choosing the pair on divergence well that may be subjective cause we know as normally pound has a daily range bigger then euro so… but again that question of what pair to choose i really dont know if there’s any rule or anything that identifies the pair that will run most that day…
Cheers.
Edit - The circle areas are from diferrente times of the day … is that you need to have in mind…
there may be a little divergence on the judas…but that is not what the guy has interpreted divergence to mean…
because the fiber did not make as big a high as the cable in the larger circled aresa…he interprets that to mean divergence.
but it isnt.
so message still stands.
There is no divergence!Both pairs,fiber and cable make HH. GLGT!
My interpretation of the whole SMT divergence…
[B]Failed Lower Low[/B]
If we talk directly about the cable and fiber, as they are highly correlated, the pair which [I]fails to make the lower low,[/I] is classified as the weaker pair… That is the one that should be bought into to go long…
[B]Failed Higher High[/B]
Vice versa, the pair which [I]fails to make the higher high[/I], is the weaker pair, and that is the one to look for an entry short…
My take on this - a movement in price is simply an imbalance of buyers and sellers. Price will move upwards if there are larger amounts of buying than selling, and will move downwards if there are more sellers than buyers… When there is an imbalance of buyers and sellers, price is simply trying to find its middle ground - its equilibrium.
Applying to the SMT concept, if one pair is making higher highs, and one pair is failing to, this shows one pair is being heavily bought into - which allows an increase in price. If the other pair is failing to make higher highs, the reason i see for this is because the buying power is being absorbed by the sellers as they are taking the other end of the trade… Thus accumulating large short positions - this is not instant as we know large money (smart money) needs time to acquire their positions and thus you usually see price enter range bound movement for a period of time - giving smart money enough time to acquire their positions at the best possible price…
And obviously, in the other side, the price failing to make the lower low, to me indicates that a large amount of selling is being bought into by buyers… For similar reasons as above they need time to acquire the positions at a given price and therefore you get range bound price action…
Anyway, this has just been my take on it, im sure ICT will clarify any misconceptions on the topic…
:57:
Did anyone get the Chris Lori ‘Inside the Banks’ webinar that ICT mentioned?
Is it downloadable or do you have to watch it through the website?
Its available for sale on the forexmentor site.
Bro, I am pumped all of the time. I am well grounded and if I have learned anything in life, you must be happy with yourself and be grateful for every blessing you have in life. Yeah, I have highs and lows just like anyone else, but I always focus on what matters. Money isn’t on that list.
Find your happiness, true happiness bro and the rest will take care of itself!
BE COOL STAY IN SCHOOL
I think there will be some USD strength on Monday:
- USDX at key support level
- Bond divergence: 30YT made a lower low, while the 5Y & 10Y posted a higher low (06/22 - 06/29)
- Stock divergence: NASDAQ did not confirm the higher highs made by SPX and DJ
- Currency pairs tend to fill the gap soon or later
Thanks everyone for your input.
I re-watched the video “Smart Money Swing Trading Concepts” this afternoon. There was no mention about weaker or stronger pair to trade. Perhaps my initial understanding of the concept was wrong.
If I am stalking EURUSD and my bias is to go long, then I would wait for price to dip lower to reach OTE or key support. How do I know if this is the turning point? If I see that EURUSD is dipping lower to the key levels but GBPUSD fails to do so, this tells me that EURUSD has a high probability of turning up and therefore this is where I can enter the trade. Since I am stalking EURUSD, I should trade this pair and not change my attention to GBPUSD. According to the teachings of ICT, we do not enter a trade just because we see SMT divergence.
Do you think this makes sense?
Pipsaday,
For direct information about ICT’s taught correlation concepts, refer to this video:
Correlation Concepts - Inner Circle Trader - YouTube
There is no reason to trade both the cable and the fiber, it’s entirely your choice to trade just one of the two if you like, as many other tools that have been shared will work with only one pair…
However, the whole reason for the SMT divergence concept is to be able to identify a real movement in price to the up or downside in compared to the fake out - its to be able to identify the Judas swing - the sucker play…
In using two highly correlated pairs - such as the cable and fiber, their movements should theoretically be aligned with each other, and thus higher highs and lower lows should be matched with each other. The most powerful time to use and identify a divergence in prices between the two is when price is approaching a key noted level that we should be watching… Now when price approaches this level, if you start seeing higher highs, or lower lows and this is not confirmed with a match in the other pair, thats your tip off to know that the movement in price at that time is the sucker play… From this point, the idea is not to just to buy or short into a pair, the idea is then to focus on the weaker pair - the pair failing to make the higher high or lower low, and wait for an entry to form in these ie OTE, reflection pattern etc…
SMT divergence on its own is not enough to just enter a trade, ideally you want the most amount of confluences possible to tell you that the trade will go your way… At the end of the day, that’s all we can really do, there is no such thing as a sure fire trade, price is free to do what it wants, when it wants. All we can do is increase our likely hood of the possibility of a winning trade…
:57:
My example how I use SMT:
This has turned my bias form bullish to bearish.Commercials decreased drastically their longs but price has remained in range.They have the information.They know the euro will drop.
Weekly chart
H4 OTE at key S/R zone 1.3280
H1 bearish divergence(between highs of days)
M15 entry at 1.3270,DR1,key S/R 1.3280,NYO,OTE.
So I use SMT between days(PDH/L,PD2H/L) or weeks(PWH/L)
Unfortunately I took my profits too early 
Michael has held this position open much much longer.He is the pro!