---
title: 'Smart Money for Beginners: How Banks Trade?'
source: 'https://youtube.com/watch?v=PW5zwac9fjM'
video_id: 'PW5zwac9fjM'
date: 2026-07-30
duration_sec: 1772
---

# Smart Money for Beginners: How Banks Trade?

> Source: [Smart Money for Beginners: How Banks Trade?](https://youtube.com/watch?v=PW5zwac9fjM)

## Summary

This video explains the Smart Money concept, which divides market participants into uninformed retail traders (95%) and smart capital (banks) that control price movements. It teaches how to follow bank algorithms by analyzing liquidity, imbalance, and premium/discount zones to improve trading results.

### Key Points

- **Introduction to Smart Money Concept** [00:03] — Smart Money concept fundamentally changes understanding of the market by focusing on capital size: smart money (banks) with large volumes can influence price, while retail traders cannot.
- **Uninformed vs. Smart Money** [01:20] — 95% of traders are uninformed (stupid money) and lack price influence; smart money (banks) control every movement using unique algorithms. The concept studies traces of smart money on charts.
- **Who Belongs to Each Group** [02:19] — Stupid money includes funds and traders with private accounts; smart money are banks. Price movements exist for banks to profit, as they provide liquidity and others are liquidity.
- **No Holy Grail** [03:08] — If everyone trades Smart Money, nothing special happens because it's not a guaranteed win. Liquidity will still be used against traders who make mistakes.
- **Liquidity Concept** [04:12] — Traders create liquidity via stop-losses. Smart capital seeks liquidity to open/close positions: they buy where there is sell liquidity and sell where there is buy liquidity.
- **Stop-Loss Placement** [05:26] — Most traders place stops above highs (short) or below lows (long). Equal highs/lows concentrate stops; smart capital uses these for order filling.
- **Trading with Smart Money** [06:38] — Buy after removing sell liquidity below old lows; sell after removing buy liquidity above old highs.
- **Imbalance (FVG) Defined** [07:07] — Imbalance is a candlestick formation showing inefficient pricing for one side. The market later returns to fill it, acting as a magnet.
- **Bullish Imbalance Setup** [08:04] — For bullish imbalance, enter long at minimum of third candle, stop-loss under min of second or first candle.
- **Bearish Imbalance Setup** [09:15] — For bearish imbalance, enter short at high of third candle, stop-loss above high of second or first candle.
- **Premium and Discount Markets** [10:28] — Smart money buys at discount and sells at premium. Use Fibonacci grid from impulse move: 0.5 level is fair price; above is premium, below is discount.
- **Short Setup Using Three Elements** [12:17] — Open short after activation of buy stop-loss or imbalance fill in premium market. Examples show price updating highs, then falling.
- **Higher Timeframe Analysis** [15:13] — Start with higher timeframes (daily, weekly) to determine direction, then switch to lower for entries. S&P 500 example shows premium market update and subsequent fall.
- **Target Identification** [16:49] — Initial targets are unfilled imbalances or previous lows. Fibonacci retracement helps set targets within the range.
- **Potential for Deeper Fall** [18:57] — If imbalance is large, price may trend deeper, but most traders focus on shorter-term targets.
- **Liquidity Sweep Example** [22:54] — In premium market, price updates high of previous day (liquidity sweep) then drops. Imbalance acts as zone of interest for entry.
- **Long Position Examples** [26:53] — Similar process for longs: correction in discount market, remove sell liquidity, fill bullish imbalance. Examples show entries at beginning of imbalance with stop under nearest low.
- **Conclusion and Call to Action** [28:55] — Video only touches basics; recommends extensive backtesting before live trading. Encourages like, comment, and Telegram channel subscription.

### Conclusion

Smart Money strategies rely on following bank algorithms by trading liquidity sweeps, imbalance areas, and premium/discount zones. Success requires extensive practice and backtesting.

## Transcript

today's video I will tell you everything you need to know about the concept of Smart Money from a fundamental point of view. After watching this video, you will completely change your understanding of the market, you will understand the logic of price movements and
significantly improve your trading results. Most of the information on the topic of trading that is in the public domain usually concerns technical analysis and everything connected with it. With the help of books, seminars, webinars and
other information flows, traders have been led to believe that supply and demand, figures, trend lines, moving averages and everything of that sort, are what really makes the market move up or down, but this is
only a facade of what is actually moving with me. I divide market participants into two groups, the so-called stupid and smart money. The division of these groups is based on
the size of capital. Smart money can influence the price with the help of large volumes; can influence the price with the help of large volumes; stupid money cannot do this. What is the main point? Uninformed money is the main
part of the market. If we speak conditionally, then this is 95 percent of all traders, and we also belong to this group. Despite the fact that there are so many such traders,
we still cannot provide Any pressure on the price is all because we are too small in monetary terms, and the second group, that is, smart money, is small in quantitative terms, but
large volumes capable of truly influencing the market are precisely with them. They control every movement down to the smallest detail. The price is delivered to certain values using unique algorithms. The
smartmoney concept studies the traces of smart money that remain on the chart as a result of price manipulation, and our main task, as three cores, is to follow smart capital when opening our positions. Who belongs to these groups?
Who belongs to these groups? Stupid or uninformed money are funds and traders with private trading accounts, and smart money are banks. All price movements occur not so that you can make money, but so that the
banks can make money because this is their business, they are liquidity providers. And everyone else is liquidity. Before we continue, I recommend subscribing to my Telegram channel. Here I will describe trading analytics and thoughts on the market. In
it, you will find a lot of useful and interesting information for yourself as a trader. Follow the link in the description under the Video. Let's immediately analyze the issue. Regarding the popularization of the concept, what if everyone starts trading according to Smart Mama,
nothing will happen? Because this is not the Holy Grail that guarantees a 100% win rate, you will in any case have losing positions. All due to the subjectivity of any analysis, smart capital will
fill its orders in exactly the same way using liquidity above and below the current market price and there is no difference. Who will act as this liquidity: traders trading on a breakout or based on Elliott waves, or those who are looking for traces of smart
Elliott waves, or those who are looking for traces of smart money and ultimately make mistakes. Let's consider the main elements of the smartmoney concept: liquidity, imbalance, and premium Discount Market. I will not deeply cover each topic with all the
subtleties, tricks, and nuances. Now we will only talk about the basic mechanics. The topic of liquidity is very extensive and in the future, a detailed video about this will be released on the channel. the future, a detailed video about this will be released on the channel.
During trading, traders create liquidity by opening positions and placing pending orders in the form of a stop-loss for buying and a stop-usage for selling. Smart capital is always looking for liquidity to open and close
its positions. They buy where they are.  Liquidity for sale and they sell Where there is liquidity for purchase, you should do exactly the same if you want to
open high-quality positions. How to look for pull liquidity? First of all, ask yourself where you would place your stop-loss if you were place your stop-loss if you were opening a long or short position. If you
do this, then in most cases you will have an idea of ​​​​where other traders have stop-losses because 90 percent of people do not even realize that they are doing exactly the same as others, regardless
of the concept of chart analysis and the reasons for opening a particular transaction. Most traders will place their stop in one place. When opening a short position, the stop loss will be placed above the nearest maximum, and when opening a
long position below the nearest minimum. You should also pay attention to equal minimums and maximums. They are created by artificially concentrating a huge number of stop-losses at one level. All available
liquidity that has been formed will be used by smart capital to fill its orders. Trend liquidity is another manipulative tool in the arsenal of smart capital with which liquidity is formed.  In
the future, it will be used for the purpose of further markdown or markup of the asset. Liquidity of the downward trend will be used for future growth, providing profit to smart capital. Slung
positions. Retail traders will be left with unprofitable short positions. Retail traders will be left with unprofitable short positions. happen the other way around. Traders who opened long positions will be
left with unprofitable positions during trend tests. With the help of this liquidity for sale, a future markdown of the asset will be carried out, which will provide profit to smart capital. In general, to put it simply, you should try to open
your positions exactly the same way as Smart Money does. You should buy only after removing liquidity for sale below old Lows and sell after removing liquidity for purchase above
old Highs. Next, we will consider the most effective and simple setups stages of acquaintance with the concept of smartmoney, but before that, we will briefly talk about imbalance and premium discount. Market
imbalance is a trick. A candlestick formation displays the range where the price was offered ineffectively for one of the parties to buyers or sellers. An algorithm that ensures the efficient operation of the market will always strive
to fill the imbalance and  To trade the range in which it was formed, this is a magnet for the price. We will use the balance as a target for a future markup or markdown of the asset and as a zone of interest. Where
will the price reaction be expected? To determine the range of ineffective pricing, we must see the formation of three candles. If we talk about a bullish balance, then we will be interested in the area between the high of the first
interested in the area between the high of the first candles and the third candle. This is the place where we see only buyers. Only liquidity is offered for purchases. The market will strive to return the price to this range to
balance. This will give the opportunity to anyone who does not want to sell in this range. In a bullish balance, the balance will be used for purchases. Therefore, entry into a trade
will occur when the price returns to its partial or complete filling. A limit order in Long can be placed at the minimum of the third candle. This is the simplest entry method that offers the
greatest number of opportunities, regardless of where you enter from the minimum of the third candle or when it is half filled or when it is completely filled. Stop loss will always be placed under the
minimum of the second or first candle. Bearish imbalance is determined in the same way as bullish imbalance by three candles: the minimum of the first candle and the maximum.  The third candle
displays the range in which the price was offered ineffectively. In this square, we see only supply and liquidity for sale. Therefore, the price for buyers was offered unevenly and in order to effectively balance this
area, the market will return here at some point. This will give the opportunity to anyone who This will give the opportunity to anyone who wants to buy in this range. For us, this moment will provide an opportunity to open a short position. A limit order
can be placed at the high of the third candle, and a supplus will be placed above the high of the second or first candle. Imbalance and liquidity are fundamental elements in the smartmoney concept. For these reasons, the market
rises or falls to restore balance in areas where the price was offered ineffectively and in order to activate a stop loss, these are basic things that you must understand. Balance is an extensive topic
with many nuances and subtleties that will not be touched upon here. Therefore, if you want to get acquainted with this topic in more detail and in depth, watch the video
in the tips. Now we will briefly analyze what Premium and Discount Market are, and then I will tell you how all this needs to be synchronized to open high-quality positions. You will always
consider  Opening a position in a certain trading range, and within it, you can identify where the prices will be at a discount, that is, the Discount Market, and where the prices will be at a premium, that is, the Premium Market. Smart money always
strives to buy an asset at a discount in the Market and sell it at a premium in the Premium Market. You should make it a rule to do the same. This is a fundamental mechanism in the Smart Money concept.
To determine the current trading range, you need to stretch the Fibonacci grid for the impulse movement from left to right. This is usually done according to the current structure. In the grid settings, set the value of 1, 0, 5, and 0. One is the
beginning of the impulse. A, 0, respectively, is its end. respectively, is its end. We are most interested in the value of 0.5, which is 50 percent of the trading range, which is considered a fair price. And they act as a
conditional magnet for the price, since reaching this level implies the beginning of a set or fixation of a position by smart money. Everything above smart money. Everything above 0.5 is the Premium Market. If the market is
bearish, you expect a continued markdown of the asset, then you are always interested in waiting for a correction in the Premium Market to set up a short position. Discount  The market is the zone in which we are interested in considering a long position, its
definition also occurs based on 50 percent of the trading range, everything below 0.5 is price discomfort. I will not explain the structure in this video so as not to drag it out too much. There is already information on this topic on the channel, see
the tips. Now let's figure out how we can find obvious and high-quality opportunities using only three opportunities using only three elements: liquidity imbalance and premium
discount. Market opening a short position will be considered after activating a stop-loss for purchase or balancing the price in the premium market. Usually, you will price in the premium market. Usually, you will encounter two variations of this setup. 1
is when the price during a fall and the formation of the lower boundary of the future liquidity for purchase, which will subsequently be removed before continuing the fall. This short-term maximum will usually be around
maximum will usually be around 50 percent of the last impulse. In the second option, during the fall, new semi-liquidity for purchase is not formed, therefore, we expect that a
trading range and after its removal, we will consider opening a short position. In addition to removing liquidity, we should see the achievement of the bearish imbalance area, this is our zone of interest.  Where will it be relevant to expect a
price reversal and continued depreciation of the asset if the price updates this High but the imbalance area is not filled even partially, then it will be too early to open a short
position. We must patiently wait until the price here is rebalanced. The formation on lower timeframes of one of the bearish setups that you see here will serve as
confirmation that from these values, smart capital is really going to smart capital is really going to produce a depreciation of the asset. Let's imagine that this bearish imbalance was formed on the daily timeframe, then to search for a
bearish setup, we will need to use the hourly and 15-minute timeframes. Well, if this is superimposed on the current schemes, it will look like this. Let 's say on the Hourly timeframe,
entry into a position will occur after the breakdown of the structure. A Ford limit order can be placed at the beginning of a newly formed bearish imbalance, and a sup-loss for the last maximum. The initial targets will be the minimum
from which the correction began and the first problem area below it. This area will usually be an unfilled bullish balance on it. You position with elephant positions works absolutely fine.
Therefore, I will not waste extra time repeating the same thing. Let's move on to examples on the charts. The principle of opening a position that I just described will work on
all time frames without exception. However, you should in any case begin analyzing the chart with higher time frames because with their help you can determine in which direction the price is moving and where it is heading. Then you will be able to
open a truly correct transaction. This is the SNP 500 daily time frame chart, and here you can see pricing similar to what I showed in the
diagrams. The price in the Premium Market updates significant semi-liquidity for buying or balances this ineffective range, after which a fall begins
after updating the maximum of the previous month. You have several variations for opening a position in a downward direction. The first option was with a partial filling of this imbalance, which is located within the monthly order
block. A short limit order will be placed at the very beginning of the imbalance. Asus can be placed beyond the last five candlestick maximum. Targets can be set both within the
current range and beyond it if  If we talk about the initial target for a future decline, we can determine it by the last impulse by extending the Fibonacci grid from this Low to this High.
In the discount market, there is an unfilled bullish imbalance, this is the first problem area for a downward movement. The algorithm will primarily values. The second target will be the minimum of the previous
second target will be the minimum of the previous month. Here we see that the price, before starting to rise, formed a significant pull liquidity, equal minimums, behind this level there will be a huge accumulation of stop-loss orders for sale, this is the
next target for a downward movement. The main reason for this is that this minimum was not formed from any significant area of ​​interest. As we
see below, there is an unfilled monthly imbalance, which is a magnet for the price on higher timeframes, and we should be guided by them first of all.
happening. I also determined this trading range using a monthly timeframe simply by the last impulse. And even if you trade intraday, you will still need to look at both the monthly and
weekly timeframes to form your own  Bias where the price will move What are the goals of this or that movement movement Let's go to the monthly timeframe
here we see that after the breakdown of the ascending structure, a deep correction of this Loy began Having determined the premium market, we can identify the potential for a future correction and find a reference point from where the price can get a
reaction to continue the fall The reference point is this green full-bodied candle, this is a bearish order block A lesson on this topic is already on the channel, see the tips And now ask yourself the question, what is the initial target of
the question, what is the initial target of this fall Where is the first problem area The magnet where the price will strive As you probably already guessed We will primarily focus on this balance because there are no
significant Crazy interest above it Where will it be logical to assume the continuation of upward pricing pricing in general if we move the chart a little, we
will see that the potential for a future fall can be much deeper and we will expect a price at least in the region of 0.5 of the last impulse But given that few of you are engaged in positional trading, if there are any at all, I do not
see the point in analyzing transactions with such ambitious goals I just  I said this to show you how we can build our bias regarding the future price direction and then with this we can
open both swing and intraday positions in the right direction. Let's go back to the daily timeframe and look at other examples that correspond to the diagrams I showed before.
As I said before, one of the possibilities for opening a short position was with a partial balance filling immediately at its beginning. This technique for entering a trade will not always justify itself. Because at this
stage, you still do not see confirmation that smart capital is really going to mark down the asset from these values. And the stop loss may often not suit you in terms of the risk-reward ratio. Another option for
entering a trade would be to switch to a lower timeframe, for example, 4 hours, and look for one of the bearish setups that I showed you earlier in the diagrams. I will not switch to a lower one either, so as not to take up extra time.
Everything is visible here on the daily timeframe. If anything happens, you can always open your chart and examine this pricing in more detail.
So, we see that the High of the previous month was updated by a single high. Therefore, to search for a Short position, we will be interested in seeing a local breakdown of the structure on 4 hours, that is, an update of the minimum from which
this maximum was formed. This word will be an update of the Low of this candle. It is from these values ​​that the last impulse began when changing the structure. We will always be
interested in seeing an impulse downward movement on which a bearish balance will be formed. What we see in this case is a key moment. When the price returns to this area, we will have better opportunities to open a short position. A
limit order for short can be placed at the beginning of the bearish imbalance of the beginning of the bearish imbalance of this candle, and a conservative stop loss will be behind the last high from which the asset's depreciation began.
This is the simplest and most effective option for entering a trade. But if you want to see additional confirmation of your analysis and a shorter stop loss, then it will be relevant for you to switch to a 4-hour or hourly timeframe to
enter based on a bearish setup that can form in this zone. You can also determine the Premium Discount Market and expect that in the area of 50 percent of the trading range, a buy order will be formed based on liquidity,
which will be removed before the start of the fall. This will be your opportunity to open a trade, taking into account that  The setups that we are analyzing are exactly this and assume that we will look for such opportunities
through two candles, the bearish imbalance is filled, after which the fall Pay attention to the work with liquidity. This is a black candle that liquidity. This is a black candle that opens with a slight increase, updating
the High of the previous day, which was formed in the Premium Market. After which we see aggressive development in a downward direction. This is one of the variations of what we want to see at the end of any correction.
What is happening here? We can consider a new trading range from the consider a new trading range from the last High to this low in the region of 50 percent. Pull liquidity has formed to buy the High of this candle. We will wait for it to be
removed. By analogy with the previous example, before continuing the fall of the zone of interest, in this case, this medication block acts as a reference point for this medication block acts as a reference point for me where I can expect a price reaction.
me where I can expect a price reaction. Well, we watch the development. High of the previous day, and only then continued to move down. As you
noticed based on these three examples that I have already shown, the price delivery occurs according to the same principle. At the beginning, we see an update of the High of the previous month in the Premium Market, and then locally the same thing happens
only when the High of the previous one is updated. then move on to analyzing the same possibilities, only in a different
direction. We define local Premium Discount Markets and the first thing we see is a small bearish balance. Here, considering short positions in this trading range, we will wait until
the price reaches exactly these values. Otherwise, the trade cannot be opened. A short limit order can be placed at the beginning of the imbalance with a conservative beginning of the imbalance with a conservative stop-loss above this high.
candles, the price did not reach the bearish balance area and we also had a previous minimum updated. Does this tell us that our initial scenario is no longer relevant? No. This does not change anything. This is typical
pricing for consolidation. We still have an unfilled imbalance, but now there is another liquidity pool for buying in front of it. We expect this liquidity to be withdrawn and this ineffective range to rebalance before
continuing to fall. Nothing changes compared to the previous examples that I have already shown you. Now let's look at the results.
targets that were set on the monthly  The following trading ranges will develop according to the same principle in the timeframe. For example, here in the premium market, you may have noticed huge semi-liquidity in the form of equal
Hughes, and above it there is a filled bearish balance. The price will tend to move here during the future correction, and this will be the next opportunity to this will be the next opportunity to enter a short position.
works the same on all markets and timeframes. Now let's look at several similar opportunities, but only for a Long position. I will not analyze each example in the same way
as the previous ones, as well as we will not talk about the context, since the sequence of actions will not differ. Only one price direction changes in the examples shown. The definition of the trading range
occurs from the bottom up. This is the minimum from which the impulse began until its completion. To consider a Long position, we are interested in a correction in the discount Market, and after removing liquidity for sale and partially or completely
filling the balance with it, we could enter the trade immediately. I would like to clarify that in both examples, zones of interest from a higher timeframe are used as a reference point from where the price will receive a reaction. reference point from where the price will receive a reaction.
removed liquidity for sale. Areas of ineffectiveness have already been noted in them. The pricing you see on the chart at the beginning of the imbalance in both the first and second examples, we could place a limit buy order with a stop-loss
below the nearest minimum. This is not the only option for opening a position. You always have the opportunity to enter lower timeframes while the price is in the zone of interest and enter based on one of the previous setups that
can form in it. Now let's look at pricing on the minute timeframe at the moment when the price was inside this bullish was inside this bullish imbalance.
is a breakdown of the descending structure after the formation of the price peak, from where the correction began, we could determine the local trading range in which we can work. As usual, we will be interested in the correction and the formation of a
new structural element in the discount market. In this case, the price must update the liquidity for sale and fill the balance with it, which is what happened here. fill the balance with it, which is what happened here.
no other development scenarios in this range. Discount Market has only one area of interest. From where it will be logical to allow the price to react, this bullish imbalance, and above it, equal minimums were formed. This is a large paulyquidity that was
used by smart capital.  To fill it exactly with a purchase, you could open a Long position at the beginning of the imbalance with a stop-loss for the nearest minimum, and take profits could be determined based on the initial range
based on the initial range that was considered on the hour. fully reflect the concept of SmartMoney; it is only a small and extremely
simplified part of what you can use when analyzing a chart before you start applying the information from this video on a real account. You need to do extensive work on history; try to see for yourself the
effectiveness of what I just talked about. Well, if you learned something new in this video and you liked it, then like it and write a comment, because this will greatly help promote this video. And also, don't
forget to subscribe to my Telegram channel; the link is in the description.