Smart Money Trading Strategies — Step-by-Step Guide & Transcript

[00:02] too much noise on the price chart and not having a specific trading strategy. That's why in this video we will walk you through three exceptional smart money trading setups along with mechanical rules leaving no room for

[00:15] guessing. These strategies combine key concepts from price action in smart money, including market structure, fair value gaps, liquidity grabs, equal highs and lows, and trading psychology. If that's something you're interested in,

[00:28] as always, smash the like button to show your support. And let's get started. Like I mentioned, these strategies focus on market structure, fair value gaps, liquidity grabs, equal highs and lows, and multi-time frame analysis. But

[00:44] here's the best part. We are not going to mark these manually on the chart. Instead, we will use the price action toolkit indicator to automatically identify them for us. So without wasting any time, let's start

[00:57] with the first setup. In the first trading strategy, we use two time frames. On the higher time frame, we analyze market structure to determine the market direction and trade along with the trend. This includes marking

[01:11] breaks of structure and changes in character. Then we highlight the fair value gaps, which serve as our optimal trading zones. Next, we zoom into the lower time frame to find the entry trigger, which is

[01:23] typically a liquidity grab. Once we spot it, we simply enter the trade and set our targets. Now, why does this strategy work? By combining these three concepts, you make sure that you are trading with the trend, entering at

[01:37] key supply and demand zones, and gaining extra confirmation from lower time frame So, let me show you how it works on the price chart. Like I said, we use the price action toolkit to mark all of the concepts

[01:51] automatically. So, let's start by applying this tool. From the indicators tab, type price action toolkit and click on the indicator provided by flux on the indicator provided by flux charts.

[02:06] see many options to apply to the chart. But for now, let's mark the BOS chalk and chalk plus in the market structure section. These are the basic elements of the market structure framework. Here we have the basic diagram showing

[02:20] the market structure labels within the indicator. The BOS label represents a break of structure which happens when the price breaks recent highs or lows. A bullish BOS indicates bullish momentum and suggests a possible continuation to

[02:34] the upside. On the other hand, a bearish BOS signals bearish momentum and suggests a possible continuation to the downside. Next, we have the change of character or chalk labels. A typical bullish chalk

[02:48] happens when the price first breaks a recent low, creating a bearish BOS and then immediately breaks the swing high leading to that BOS. This forms a regular chalk and can indicate a possible reversal to the

[03:01] upside. Similarly, a bearish chalk occurs when the price first breaks a recent high, creating a bullish BOS, and then quickly breaks the swing low that led to that BOS. This signals a potential reversal

[03:14] to the downside. However, the price action toolkit has an extra feature. The indicator can also detect when the market forms a lower high before breaking the bullish structure. This is labeled as chalk

[03:26] plus, which means it is a stronger or more confirmed change of character and more confirmed change of character and can be a better signal for reversal. Next, we have the fair value gaps. If you enable this option in the indicator

[03:39] settings, they will appear automatically on the chart. The fair value gaps represent the imbalances on the price chart where there is a gap between the fair value of the price. In the settings tab, increasing the sensitivity removes

[03:52] smaller gaps and only shows the larger ones. later returns to fill these gaps as the price looks for balance. We will use these gaps as key areas of interest expecting possible price reactions.

[04:07] Finally, we have liquidity grabs. When you apply it to the chart, you'll notice red and green circles appearing. These represent bearish and bullish liquidity grabs, respectively. When the price wicks above a previous

[04:20] swing high, the indicator identifies it as a bearish liquidity grab, signaling a as a bearish liquidity grab, signaling a potential downward movement. Similarly, swing low, it is marked as a bullish liquidity grab, indicating a possible

[04:34] Liquidity grabs highlight areas where the market sweeps stop- losses before reversing direction. These signals can be powerful for trade entries, concepts. If you decrease the pivot length and

[04:48] wick body ratio, the indicator identifies more liquidity grabs because it becomes more sensitive. This means it will catch smaller wicks and more price movements that could be signs of liquidity being taken.

[05:01] Now let me show you how this trading strategy works on the chart. This trading strategy uses two time frames. Our suggested combination is the 1 hour and 5 minute time frames, but you can use other time frames as well. Just

[05:15] at least two times lower than your analysis time frame. step is to identify the market direction. You can do this by identifying market structure concepts. For example, if the price keeps making

[05:31] higher highs and higher lows, breaking the previous market structure, this shows a clear uptrend and we are bullish until we get a change of character. step is to mark the fair value gap areas. On the higher time frame, these

[05:47] gaps are more powerful and can act as strong support or resistance levels. Once you mark these fair value gaps, wait for the price to pull back into one of them. When the price enters the gap zone, switch to a lower time frame to

[06:00] look for an entry. On the lower time frame, you want to see signs of a possible reversal. One strong signal is a bullish liquidity grab. This happens when the price moves below a recent low, takes out stop

[06:14] losses, and then quickly reverses up. If this move also breaks a short-term bearish structure on the lower time frame, it gives more confirmation. In other words, it forms a change of character.

[06:27] Finally, it's time to open the trade. You can place your stop loss below the low of the liquidity grab and your target can be the next important level in front of the price on the higher time frame.

[06:44] time frame by confirming a downtrend with lower lows and lower highs. Then mark the fair value gaps as possible supply zones. When price pulls back into one of those gaps, switch to the lower time frame and look for a bearish

[06:57] liquidity grab above a recent high. Enter the trade after confirmation. Place your stop-loss above the liquidity grab and aim for the next key level below. With all that being said, make sure to

[07:10] use proper risk management to protect your capital. Stick to your plan and avoid emotional decisions. This strategy works best in trending markets, not in choppy conditions. Keep learning and reviewing your trades to improve over

[07:24] time. Now, let's move on to the next trading strategy. The second trading strategy also uses two time frames and combines the concepts of buyside and sellside liquidity, liquidity sweep, and fair

[07:37] value gaps as an entry point. So, what is buyside and sellside liquidity? Liquidity above a high or a group of highs represents buyside liquidity and liquidity below a low or a group of lows represents sellside

[07:51] liquidity. Now what happens around these levels? Institutional traders or smart money often target these liquidity zones. For example, if smart money wants to buy an asset, it needs a lot of sellers in the

[08:04] market to fill their large buy orders. So where are the sellers in the market? We know that if the price taps into a key support level, many retail traders or even institutions will go long. They will place their stop- losses, which are

[08:18] basically sell orders, somewhere below that area. Smart money will push the price lower to grab that sellside liquidity and activate those stop- losses. This gives them enough selling pressure to fill

[08:30] their large buy orders. Also, breaking below this level will market thinking the price is about to drop further. But in many cases, after smart money grabs the liquidity, the price quickly reverses and moves higher.

[08:47] This traps both early buyers and breakout sellers. The same logic works in reverse for buyside liquidity. If smart money wants to sell, they need buyers. So, they push the price up above a key resistance

[09:01] breakout entries, and then reverse the price downward after collecting enough liquidity. With all that being said, some liquidity levels are more important than others. Certain criteria can help you spot the

[09:15] stronger ones. For example, liquidity around major swing highs and lows, higher time frame levels, or areas with multiple equal highs or lows tend to be more significant. Now, the best part with the price action

[09:28] toolkit, these important liquidity zones appear automatically on your chart, showing you exactly where institutions are likely to hunt next. This makes it where the smart money might be targeting.

[09:42] Now, let me show you how the second trading strategy works on the chart. First, apply the price action toolkit and from the settings tab, turn on the buy side and sell side liquidity zone options. Once enabled, you will see the

[09:56] major liquidity zones marked clearly on your chart. Now, wait for the price to break out beyond one of these zones and then quickly close back inside the range. This shows a liquidity sweep or false breakout where smart money has

[10:11] preparing to move the price in the opposite direction. Then zoom into the lower time frame and look for fair value gaps that formed right after the sweep. These gaps show imbalance and can act as entry zones. If

[10:25] it's a bearish scenario, for example, after a sweep above a buyside liquidity level, look for a gap and signs of a reversal. Once confirmed, you can open a short trade. Place your stop loss above the high of the sweep and target the

[10:40] next key level or sellside liquidity below. The same concept applies to the bearish scenario. We focus on the sellside liquidity below key lows which the indicator automatically marks. When the

[10:54] price sweeps this level and closes back inside the range, it signals a bullish liquidity grab. Then we zoom into the lower time frame and wait for the indicator to highlight a bullish fair value gap that forms right after the

[11:07] sweep. This gap is used as the entry zone. Enter a long trade from the gap. Place your stop loss below the sweep low and target the next buyside liquidity level. This simple process helps you trade with smart money, not against it.

[11:22] Now let's continue with the third smart money trading strategy. This setup uses only one time frame and combines the concepts of equal highs and lows, liquidity sweep, and once again, fair value gap entry.

[11:36] So, what are equal highs and lows and why are they so important? where the market has reacted multiple times without breaking through. For instance, when the price touches the same high two or more times and fails to

[11:51] break above it, it forms equal highs. These levels often become psychological zones where many retail traders place their stop-loss just above the highs anticipating a downward move. Smart money traders on the other hand see

[12:06] these levels as liquidity pools. These are areas filled with pending stop orders where price manipulation is likely to occur. When price makes a sharp move to take out these equal highs or lows, it is called a liquidity sweep.

[12:19] This move often signals that a reversal is near, especially to the downside after equal highs are taken. But what happens if a fair value gap forms just above those highs? That creates a perfect trading opportunity.

[12:33] The sweep grabs the liquidity and the fair value gap provides an ideal entry zone to open a short position. To apply this setup on the chart, we start by enabling the equal highs and lows option in the settings tab.

[12:46] The price action toolkit does a great job of automatically identifying and marking these levels on the chart. By increasing the ATR multiplier in the settings, the indicator will detect and highlight more equal highs and lows by

[12:58] accounting for wider variations in price swings. We also activate the fair value gaps and wait for all the conditions of our trading strategy to be met. A high probability bullish setup occurs when price sweeps liquidity below equal

[13:12] lows while resting above a bullish fair value gap. Likewise, a high probability bearish setup forms when price sweeps liquidity above equal highs while resting below a bearish fair value gap.

[13:26] Remember, more trades do not mean more profit. Waiting for high probability setups to appear and filtering out lowquality ones is a skill that takes time and discipline to develop. With all being said, if you'd like to use the

[13:39] price action toolkit with 15% off, make sure to check the link in the description. Thanks for watching and see you in the Thanks for watching and see you in the next one.