Smart Money Concepts Explained: Best Strategies Revealed

[00:02] reveal one of the most important Concepts that you need to understand as concept whether you're a beginner or an expert understanding this concept is vital for profitability as it gives us insights

[00:16] into how major institutions like the big Banks actually trade the market so let's begin but first if you've traded before I'm sure most of you have encountered this exact problem so you look at the chart

[00:29] and you've identified a support level based on past rejections then as the price approaches that level you anticipate that another rejection will occur which leads you to open a buy position with a stop loss placed

[00:42] slightly below that support level surprisingly the price did not reverse as expected but rather breaks through the support level hitting your stop loss only for the price to Rebound in the direction that you initially predicted

[00:55] now for most of you that experience this I'm sure you'll find it really frustrating but what most readers don't know is that this is actually a common manipulation tactic that the smart money use to control prices and steal profits

[01:09] from retail Traders like us and so who are these smart money exactly smart money are actually investors that have large sums of money think of it like the big Banks institutions or hedge funds and so because these investors

[01:24] have a large amount of capital to trade they are actually the ones moving the market meaning if we're able to somehow figure out their way of thinking or even better knowing what their trading strategy is we can use it to our own

[01:37] advantage and make a profit and so with that being said here are several smart money Concepts that you must follow in order to increase your win rate as a Trader smart money concept number one supply and demand areas

[01:52] one of the key Concepts to understanding how smart money works is supply and demand areas supply and demand are levels that show a significant amount of money is coming in or out at that one particular price range this can also be

[02:06] referred to as liquidity zones as it indicates the presence of liquidity suggesting that institutional Traders or smart money may enter or exit at these price levels in the future these areas can then be used as key levels to help

[02:21] us identify trade opportunities here's one example so in this chart we upwards indicating that there are more buyers than sellers at this level meaning the demand at this level exceeds Supply which is why the price went up

[02:37] and so because of that we can actually draw a demand Zone at this level right before the price went up next as the price approaches the demand level once again supply and demand Traders can use this same key level as a possible buy

[02:51] entry because price tends to react to the supply and demand levels and so if the price were to rebound upwards after hitting the level they would have made a profit this is just one example on how Traders could capitalize on the supply

[03:04] and demand zones now I'm sure some of you would notice this works a lot like support and resistance levels and you are correct they are similar and so the question is what's the difference between support

[03:17] and resistance and supply and demand this is a question that people still often get confused so the answer to that is how they form let's first start with support and resistance

[03:29] support and resistance forms when price retests a level with a minimum of two times for example so in this chart we can see that price went up goes down then it went up again hits the previous level and comes back down and so because

[03:45] it already retested the level twice we can call this a resistance level same thing with support here we can see price went down goes up comes back down again hits the level and went up and again because it retested the level

[04:01] twice we can call it a support level now let's compare that to how supply and demand levels form so in this chart we can see that price went up as shown by this big green candle indicating that there's liquidity

[04:15] coming in at this level and that demand exceeds Supply because of this alone we can draw a demand Zone at this level and that's it it's that simple we just significantly same thing with Supply level

[04:31] so here we can see that Supply clearly exceeds demand as shown by Price heading downwards after hitting this level which means that smart money or big institutions are selling heavily at this price level

[04:44] a supply level here now in the future price may actually react to this level and retest it like in this example we can see that price hits this level and reverse

[04:57] and so because price have now retested this level twice the supply level now becomes a resistance level so to summarize supply and demand levels are actually just support and resistance levels that hasn't been retested yet

[05:13] now let's move on to Smart money concept number two which is Market structure to put it simply Market structure is the concept of understanding the behavior condition and direction of the current market let's look at this chart as an

[05:29] example but first what do you think is the market structure of this chart is it the market structure of this chart is it an uptrend downtrend or sideways now I'm sure most of you will answer uptrend because the price is going up

[05:43] and if you did you are correct this is in fact an uptrend however the reason considered an uptrend is not because it's just simply heading upwards but

[05:55] it's because of the market structure if you look closely at the movement of the market we can see that it kept forming what's called a higher highs and higher lows here's what that means first price moved upwards comes back

[06:09] down but remains above the previous lows of the price next we can see it went up and surpasses the previous highs forming higher highs the previous highs forming higher highs after that it came back down remains

[06:22] above the previous lows goes up and breaks above the previous highs forming another higher highs hence the term higher highs and higher lows now this breaking of the previous Heist is also referred to as break of structure

[06:37] and the same concept works for downtrends as well in this chart we can see that the price is forming lower highs and lower lows while also creating break of structure towards the downside hence why this

[06:50] Market is identified as a downtrend so once you've understood the concept of Market structure it's time to move on to Smart money concept number three which is called change of character to put it simply change of character is

[07:05] when price violates the previous Market structure usually this may be a sign that the overall trend is changing let's look at an example so in this chart we can see that the price is forming lower highs and lower

[07:17] lows indicating a downtrend however at some point we can see that after the price formed lower lows here price went up but this time it managed this point notice that before price always managed

[07:33] to stay below the previous Highs but this time it broke above it and this is what we call a change of character and as seen in this example after the price broke the previous highs it went down remained above the previous lows

[07:47] highs so now we have a brick of structure that formed after a change of character and because of this it is now confirmed that the market structure has transitioned

[07:59] from a downtrend to an uptrend now one of the main reasons on why important is so that we could actually identify the appropriate positions to take because we only take positions that

[08:14] are aligned with the current structure so if the market structure is bullish then we're looking to take buy positions only and if the market structure is positions only so now that we've mastered all the

[08:28] essential smart money Concepts let's see how we could implement this into our how we could implement this into our trading strategy strategy is we need to identify a trend now let's look at this chart here we can

[08:41] see that price goes up makes a pullback but managed to remain above the previous but managed to remain above the previous lows next it went up creating a breakup structure and forming higher highs and after that price went down remains above

[08:56] the previous lows comes back up and made another break of structure and forming higher highs so now we have higher highs and higher uptrend now once we found the trend the next

[09:09] step is deciding when to enter a trade so for our entry strategy we first need to analyze the chart itself we can begin by drawing important key levels that exist in the chart and in this case we can immediately see that there are a

[09:24] couple of supply and demand areas that we can draw first we can see a couple of demand levels right here here and here as we can see price heading upwards after hitting those levels indicating strong demand

[09:37] next we can also spot a couple of important Supply levels we have one right here and here now once we've identified all the key supply and demand levels at this price range we can finally search for an entry

[09:50] signal but first because the market structure indicates an uptrend it means that we're strictly taking buy positions only so we know that at these zones that we drew High liquidity is present meaning that there's a chance that price

[10:03] May retest those levels again in the future so let's see what happens to the price alright so we can see that the price zone right here so now we're looking to see if the price

[10:16] retest this level and to do that we need to wait for extra confirmation and in this case we can actually spot a bullish engulfing pattern which is a Candlestick pattern where a red candle appears followed by a larger green candle that

[10:30] confirms us that there is bullish momentum happening as price touches the demand level so let's recap what we have currently first we have an uptrend as shown by the market structure which means that we're

[10:44] only looking for a buy entry second we've identified multiple supply and demand zones and third we have a bullish engulfing pattern that formed as price hits our latest demand Zone and so I'm confident in taking a buy position

[10:58] right here now I'm gonna let the trades run nice win let's look at other variations of this setup so again the first step is finding and identifying a trend and in this chart we

[11:14] created higher highs and higher lows on an uptrend however we noticed that a change of character has happened as price went down breaking below the previous lows

[11:27] forming lower lows this shows us that the market is now on a downtrend meaning only now once we've identified the trend the next step is analyzing the chart by drawing the key levels and here we can

[11:42] actually spot a couple of supply and domain levels which shows that there is cause the price to move significantly now let's see what happens to the price so we can see here that price approaches this first Supply level however it

[11:57] doesn't mean that it will automatically retest this level we need further confirmation and in this case price actually ignored this level and simply break right through now had you taken a cell position here without any

[12:10] confirmation you would have ended up losing that's why extra confirmation is important before taking a trade next we have price hitting another Supply level up here but this time we can

[12:22] actually spot a bearish pin bar pattern right here as price approached the level having a small body and a long Wick towards the upside which signals downwards rejection and so because a bearish confirmation signal appeared as

[12:36] price touches the level we can now take a short position right here for our stop loss we can place it just slightly above the supply area and place our profit Target at the nearest demand level and as you can see the straight ended up

[12:51] being profitable now keep in mind all the traits that I showed you are just examples where the trade succeeded if you implement this strategy in a real chart you will suffer some losses because no strategy is 100

[13:04] accurate that's why risk management and placing a proper stop loss is very important and that's the end of our lesson for you like this video consider subscribing to the channel it only takes two clicks

[13:18] but it means so much to me and you can also check out my other videos as well also check out my other videos as well until next time