SMT Divergence | Smart Money Technique

[00:02] take a detailed look at one of the most key tools of the smartmali concept - SMT divergence. You'll learn how to easily find and effectively use it in any market, but we'll focus on cryptocurrencies. Next, we'll explore the concept of

[00:17] strong and weak assets, and then how to find areas of interest that are more likely to remain untested. By the way, the file with the excerpt from this lesson is already in my Telegram channel. Save and

[00:29] use as a cheat sheet. In this lesson, we will be discussing intra-market correlation, so we will always need two charts. In always need two charts. In our case, Bitcoin and Ethereum are assets

[00:42] with a strong positive correlation, and they have the same structure. If they have the same structure. If low, high, and overlow are formed for Bitcoin, then exactly the same thing happens for Ethereum . We see

[00:54] . We see loverlow, lhe low. This is healthy pricing, where every move is confirmed by market symmetry. But now look at another situation. A Low has formed in the ether, when at the same

[01:08] time we see a Higher Low here. This asymmetric pricing is called SMT divergence. Her appearance indicates two things. Smart money is actively entering the market and a reversal is beginning. If you see a divergence from below, it is always a

[01:24] bullish signal for growth. Now there is a bearish SMT divergence. Here we look for asymmetry at structural maxima. Bitcoin forms a high, then LX. And on the air during the same period we see the first high and the second. The emerging

[01:41] SMT divergence is a sign of active selling by smart money and the beginning of a reversal in a downward direction. Now look at SMT divergence on real charts. Bitcoin on the left, Ethereum on the right. And immediately an important clarification.

[01:56] You need to compare spot charts from the same exchange. This way you will get more accuracy. For example, I always analyze spot charts, and move on to futures charts when entering a trade. So, bullish SMT divergence. On the

[02:10] Bitcoin chart, Loverlow, Lover and another LLW are forming. Let's look at the same Lover and another LLW are forming. Let's look at the same period on air. First, too, Low and Lhighh, everything is symmetrical here, but then high low appears. And this is already a

[02:25] discrepancy in the structure between the two assets. This is a bullish reversal signal for both. Already at this stage, you can look for long positions. And we will definitely do this, but a little later. First, some important nuances. SMT divergence

[02:41] is determined only by swings. This loverlow is a five-switch swing, and loverlow is a five-switch swing, and this high low is a three-switch swing. It consists of this, this and this candle. The central candle is key because it

[02:55] shows the extreme of the decline, and the candles to the left and right are necessarily above it. At the close of the third candle the pig becomes confirmed. Only from this moment can the smtidivergence be considered valid and

[03:10] used in work. Now we remove the last candle. And here we have a situation where SMT divergence has not yet been confirmed. It is not worth using it in this form, because there is a high probability that it

[03:24] for a reversal. The appearance of another candle and its closing is what you need. This is already a contradiction that can be already a contradiction that can be

[03:39] hourly timeframe. Let me point out right away that SMT divergence works on all timeframes. You can look at a five-minute chart, or at a minute chart. The principles of definition and the logic of its operation remain the same. But it is important to take one thing into account

[03:53] : the possible discrepancy between timeframes. If there is a divergence on the 5-minute timeframe and a bearish one on the hour, the hourly timeframe always has priority. The higher

[04:05] the time frame, the more significant it is. And any contradictions must be resolved precisely according to this principle. On both charts I have highlighted the key swings. Here is the high from which the correction began and its

[04:17] current minimum. Ethereum is also showing the same high and there are no significant differences yet , so let's look at the next candle. We see that the second chart

[04:29] shows the maximum range for Bitcoin. Here it is. And it's not even close to being removed. This is a clear discrepancy. Can we thus determine the SMT divergence or Ether from this high to the high of the last

[04:46] candle? If you listened carefully to what I said in the previous example, you already understand that here and here there is still no full-fledged three-switch swing, and this is the key condition for using cm-divergence.

[05:01] will often find yourself in a situation where the next candle simply renews this high, and then both assets, albeit with a slight delay, will begin to move symmetrically again. This happens regularly and is absolutely abnormal. So always

[05:17] keep that in focus. Let's see what happens next. We define a three-switch swing on Ethereum and a five-switch swing on Bitcoin. After this, we adjust the SMT divergence and tie it to the

[05:32] swing we just marked. We do the same here. This is a strong and accurate indicator of the beginning of a reversal. If you perform your usual analysis without this methodology, there will be no clear

[05:47] signs of a trend change for either Ethereum or Bitcoin. He is generally testing the bulls at this moment, and it is quite possible that you would start looking for long positions here, but that would be a mistake. SMT divergence shows increased smart money activity and does so

[06:01] earlier than any other instrument. A divergence from above is always a bearish self-divergence, which indicates a distribution phase and preparation for an aggressive decline. And only after it forms, you will begin

[06:16] to see the classic signs of downward order flow, inefficiency, order books, changes in structure, and everything else. What do you think is more interesting for me to short in this case : Bitcoin or Ethereum? I think it's clear to everyone that Bitcoin

[06:32] shows weakness by forming an over-high, while Ethereum, on the contrary, demonstrates strength through a high-high. The principle here is simple. If you are considering short positions, you choose a weak asset, it will fall faster, deeper and is more likely

[06:47] to reach your targets. This bullish border block is the downward [music] movement. And this swing is key. Its breakdown will mean that the upper block is

[07:02] no longer relevant and the way will be opened for a further price decline. What would most traders do in this situation ? They will wait for the order block to be broken, then wait for a correction and enter a

[07:16] short position during it, expecting the decline to continue. This is a classic way to enter, and it actually works in most cases, but not in ours. When an asset, in our case Bitcoin, shows weakness, corrections

[07:31] either do not occur at all or are minimal. Don't wait for perfect entry points or deep corrections. This does not happen with a weak asset. The SMT divergence already hints at an aggressive and rapid decline ahead,

[07:46] so a breakout of the key swing is the optimal moment to enter a short. And here is this short position, where the key target is the minimum from which the growth began and the current maximum was formed. Stop-loss is conservative for the piggy bank,

[08:01] Stop-loss is conservative for the piggy bank, reflecting Bitcoin's weakness. Let's look at the work. The deal closed quickly. with a final result of 1: t, which is an excellent

[08:14] result. Now notice this imbalance. In a standard situation, we would wait for it to rebalance and only then look for an entry, but this did not happen. And the fact that we opened here means that we were

[08:26] prepared for this in advance. Let's sum up the interim results. SMT divergence is an early reversal indicator that also helps to choose the right asset to enter. If you are bearish, focus on the weak asset. If it's

[08:42] bullish, look for bullish SMT divergence and prioritize the instrument that prioritize the instrument that shows strength. As you can see from the previous example, SMC divergence helps you determine whether

[08:54] your area of ​​interest will be reached. This is especially true with imbalances like these. Bitcoin is showing weakness, forming a low low, while Ethereum is simultaneously forming a high low. This speaks to its strength, which means that long positions in Ether

[09:07] preferable. This is what our long position will look like. It's great, but in the current situation it's highly unlikely to be realized. The whole point is that this divergence already hints that the asset is ready for

[09:22] rapid and aggressive growth. Don't count on a correction to your zone of interest, otherwise you will simply miss the entry. Start looking for it higher, for example, by current values. If this approach does not suit you, we have an

[09:36] alternative. These are bitcoins. It will be easier to find a long position using it. Locally it does show weakness, but globally it shows strength. And after the update of this svinhai, the roles between him and the broadcast may well

[09:51] change. This sm-divergence tells us that the market is turning around and that we can expect a normal correction for entry. We choose a long position. We begin to balance

[10:03] our entry. We place a stop loss under the second candle of the formation to increase RR. And the take is conditionally on RR 1 ct. Let me point out right away that in

[10:15] real trading, it's better to set take profits on the left side of the chart for key semi-liquidity and problem areas. Let's look at the next candle. We see that the Bitcoin imbalance is partially filled, and our position is successfully

[10:30] . And in such a situation, you would most likely continue to wait for a deeper decline. Now let's look at what happened next. The price just kept going up and your limit order remains

[10:44] unfilled, while in Bitcoin we get excellent execution of a standard long position. In general, SMTDI divergence helps identify not only potential reversals, but also choose an asset for

[10:57] trading, understand the depth of a correction, and assess in advance whether your interest zone will be tested or not. What else can we use besides comparing Bitcoin to Ethereum? I will highlight two key approaches. The first

[11:12] is a comparison of Bitcoin Ethereum and any other altcoin. That is, you are looking for SMG divergence on three charts at once. In this example, Bitcoin shows weakness, while Salan's Ether, on the contrary, shows strength. That is, you are looking for situations where

[11:26] two assets move synchronously, and the third is sucked out of the structure. It gives the is sucked out of the structure. It gives the key signal. The second approach is based on the analysis of correlation by sectors, for example, MMA. The most popular arcs,

[11:40] for example, MMA. The most popular arcs, spikes, pep. An llot and another llow are formed along the arc . The spike is similar. Here is the first pig, here is the second. Appep first low low,

[11:52] and then higher low. That is, liquidity for sale was not removed from this position. The asset shows strength. And it is precisely p that will be considered as a priority. Moreover, in this case, you don’t even need to look at the Bitcoin or

[12:06] Ethereum charts. Here you can look at my study list, divided into sectors. I recommend doing the same. Now let's briefly talk about currency pairs. Here everything is built around the dollar index. Ticker

[12:19] DXY. In the adjacent diagram, substitute the euro, pound, or Australian dollar for X. The dollar index has a negative correlation with them. has a negative correlation with them. If a high is formed on it, then on the

[12:32] If a high is formed on it, then on the euro-dollar chart everything is the opposite. Low Hхайh, but this high low is already a violation of a healthy structure. After all, at the same time, a high high is being formed on the dollar index. This discrepancy is called

[12:45] divergence. It is bearish and points to dollar distribution. On the contrary, for the euro, this is a bullish divergence, signaling accumulation and strength of

[12:57] the currency. Accordingly, in such a situation we will strive to support the euro. Below, the dollar index is forming an upper high, while at the same time here we see Loverol. This is a positive SMT divergence for the currency pair and bearish for the

[13:13] index itself. The DXY is showing weakness, meaning that if it falls, the euro, pound and Australian dollar will rise. Bearish examples for XD pairs and bullish examples for the

[13:25] DXY index work on the same principles. Just mentally swap the diagrams. Here is an excellent example where both types of divergence that we just discussed in the diagrams appear simultaneously. It would be

[13:38] discussed in the diagrams appear simultaneously. It would be positions in the euro even from the current values. Now let's see how pricing develops further

[13:50] positive correlation. The only thing that has changed is the USDX ticker. That is, the dollar is traded against the kenya, the Swiss franc, or the Canadian dollar.

[14:02] If a high low forms here and a low low forms here, it is a bullish SMT divergence. Conversely, if there is a low here and a high low here, that is a divergence indicating strength in the USDX. Accordingly, our priority

[14:18] position is long. Bearish SMC divergence works in exactly the same way, but the decorrelation should be looked for at structural highs. And here is an example. The dollar index forms a high-high, a low-high and

[14:31] another high-high. And the priest will steam the dollar three times in a row, one after the other. This is an example of triple SMT divergence. The fourth point of de-acclimation, as a rule, does not occur anymore, so this is a strong bearish signal about the imminent start of an

[14:46] aggressive decline. Well, let's see how things develop further. look at three charts at once: S&P 500, Dow Jones and Nasdaq. They have a

[15:01] strong correlation with each other, and one of the indices is always either ahead or behind in terms of the movement structure relative to the other two. In our example, the S&P 500 forms a lower low, then a lower high and a higher low.

[15:15] low, then a lower high and a higher low. Dow Jones lowover low, lower high and another overlow. The discrepancy is already visible . Well, and then lower low, lower high, higher low. It turns out that the lagging index is D Jones. It

[15:30] shows weakness compared to the S&P 500 and Nasdaq, meaning they are the priority for long positions. And the Dow Jones, if it remains weak, could be interesting for shorts in the future. The last one is metals.

[15:45] Here is a comparison of gold and silver charts. The logic is exactly the same as in the examples with cryptocurrencies or stock indices. Gold forms a low low, followed by a higher low, while

[15:59] silver's chart shows a lower low and another lower low. This is the bullish reversal and tells us that silver is showing weakness and gold is showing strength. If this key piggy bank is broken, one could immediately enter a long

[16:14] position, placing a conservative stop-loss behind this low. That's all. I hope the material was clear and easy to understand. I have intentionally simplified the topic, although it is certainly much deeper, especially if we analyze the behavior of smart

[16:28] capital in more detail. If you're interested in the topic of smtidivergence, let me know, and I'll prepare an advanced video in which we'll go over everything in detail. Also, in my Telegram channel, you'll find a PDF file with a brief summary of this lesson.

[16:42] Save it using the link in the description. Good luck. Yeah.