SMC Trade Plan

The trading space is often filled with confusion and Scattered information, making it hard to stick to a trading plan and Achieve consistent income from the market. Therefore, we want to present a full smart money trading plan guiding you step by step from beginning to end.

In this chapter, first, we will explain how to apply smart money Concepts step by step on the chart to make a well-informed general analysis.

Then we will walk you through our trading setup providing specific entry and exit points.

Lastly, we will present the backtesting results offering objective evidence of how the strategy has performed in the past.

Trading Plan

Now a few key Concepts in the smart money trading plan require practicing on the chart before grasping the trading strategy

First, we have Market structure and direction, which involves determining the key levels of the chart structure and identifying bullish, bearish, and directionless markets

Next, we have optimal trading zones and Order blocks. These areas on the chart can potentially provide us with high-probability trade opportunities.

Moving on, we have liquidity Concepts. Liquidity fuels all markets, and it's crucial to identify where positions could be liquidated to prevent unexpected losses

lastly, we have an entry setup and manage an open trade once certain favorable conditions line up and we find an entry point. We execute the trade with specific order details. also, managing open trade requires monitoring market conditions and adjusting for potential success

Strategy

This trading plan consists of two major time frames

First, we have a higher time frame in which we will do most of our general analysis. We will read the market structure to find the direction key levels, fair value gaps, liquidity areas, and, more importantly, optimal trading zones that might potentially provide us with a high-quality trading setup in the

In the second part, we will zoom into our lower time frame to find confirmation and enter the positions

Remember that this trading plan is not limited to any chart or time frames; however, your entry time frame must be two-time frames lower than your general higher time frame

If we analyze the market structure and find Optimal trading zones in four hours, we will look for confirmations and entries in 15 minutes; similarly, if our higher time frame is the one-hour chart, we will zoom into five minutes to open positions.

Now I have simplified this trading plan into five simple steps. After we go through the steps, we will look at the entry models to explain how the strategy could be implemented visually.

Step - 1 Analyzing the Market Structure

In this General analysis, we implement the market structure concepts of smart money to the chart to find the market Direction and key levels.

We have three types of markets in terms of Direction.

We have a moving uptrend where the price continuously makes higher highs and higher lows, breaking the structure to the upside, so we want to trade with the dominant uptrend because it increases the chance of success.

This process continues until we get a change of character which signals a possible reversal.

Character change occurs when we get a break and close below the lowest point of Swing Low between two consecutive highs.

Moving a downtrend where the price continuously makes lower lows and lower highs, breaking the structure to the downside once again, we want to trade with the dominant downtrend until we change character. Then, the market sentiment will change to bullish.

We also have a directionless market which occurs when the supply and demand are not powerful enough to push prices into a directional Trend.

When we continuously get changes of characters on the opposite side and can't surely identify the trend, we have a directionless market.

Example -1

Here we have the GBP/JPY on the four hours chart. Let's implement the first step to find the direction and key levels.

Here we have a clear moving uptrend that made a series of higher highs and higher lows and breaks to the upside. The marMarketntiment is bullish, and we only want to look for buying opportunities. These are two of the recent consecutive highs, so the lowest point of this correction is our swing low. As long as we stay above this key level, we identify this Market as bullish the second key level is our latest High created by the price, which we will use to set our higher time frame Target.

Now let's continue and see what the market will do next; here, we can see that the Market broke the structure and created a new high, but the Market barely pushed the price upwards. Look at all our rejections which show a significant momentum loss, then we have a break and close below the laDirectiong low, which makes it a valid change of character. Now we are no longer in an uptrend, and all we need to do is wait for a one-two and three moves to the downside to identify the direction as bearish

.Then we Mark the most recent key levels and look for short opportunities now; this is all we need in the first step identifying the market Direction and key levels

Step 2 - Key Concepts of Smart Money

This step will identify fair value gaps, liquidity areas, and optimal trading zones on the higher time frame chart.

The fair value Gap is a three Candlestick pattern characterized by a significant gap between the Shadows of the first and last candles with no overlap. These gaps are created when we have an imbalance between the buyers and sellers, resulting in sharp moves. The Market often returns to these gaps to take the remaining orders and restore the balance. Then, if we have enough liquidity Market will seek to continue in the same dominant DirectionMarket.

Liquidity areas are where retail Traders enter the Market and place their stops. Let's focus on equal highs and lows and the latest swings for Simplicity. If the market grabs the liquidity areas, the chances of success will significantly improve the market.

Example

We have a moving downtrend. These are the considerable fair-value gaps that are recently created.

If the price returns to fill the gaps before continuing its general direction, it will provide us with a perfect trading opportunity.

Now where is the liquidity area - we know that this level was our previous swing low, so if the price returns to this level, support turns resistance, and we expect a form of rejection.

Traditional price action Traders will see this as a short opportunity and sell the market. They will place their stop above the Zone, which makes a lot of liquidity gather Above This Zone, so there is an opportunity for the big players to grab the liquidity they want, and the price will fall after the stops are triggered.

That is why you have to identify the liquidity or become the liquidity

Now where is our optimal trading area - the candle that created the bearish inefficiency or the latest bullish pressure before the Drastic move to the downside is a great place to look for short trading opportunities

Step -3 Confirmation and Entryin this step, we will apply the market structure Concepts, wait for entry signals, and open the position aligned with the higher time frame analysis. After mitigating the fair value gaps area, we will look for reversal signals to confirm the entry. We must wait for a change of character to verify that the short-term trend is over and the market can continue going with the dominant higher time frame direction

If we have no change of character, we will have no trade

After the change of character confirmation, we have two entry trading models

in the bullish scenario, if the change of character move creates a valid order block with fair value gaps, we will place a buy limit a spread size above the order block and stop below the swing low. We will make our trade break even by closing half our position when the price reaches our one-to-two target. next, we will close our profits if the price reaches our higher time frame. Supply area the

The second trading setup occurs with no fair value Gap in the order Block; in this case, we will put the Fibonacci retracement tool from the start to the end of the change of character move and place our buy limit precisely at the middle of the 618 and 786 levels our stop will be below the swing low and apply the same concepts for taking profits.

RECAP

In this trading plan, we use two-time frames. We have a higher time frame in which we do most of our general analysis and assess market conditions. Then we will zoom into the lower time frame to find confirmation and enter the trade. This trading plan is not limited to any time frame, but your entry time frame must be at least two times lower.

In the first step, we analyze the market structure to find the market Direction and key levels. We will point out outbreaks of structures and character changes to identify the market Direction and mark the key levels to which prices can react.

For example, we have a moving uptrend with multiple consecutive breaks to the upside. Since the direction is bullish and we want to trade with the dominant Trend, we are only interested in Long opportunities.

In Above Image latest High created by the price, which we expect a possible reaction making it a suitable place to set our long-term Target

A recent higher low is also a key level; if we get a break and close to the downside, we will no longer consider this Market an uptrend.

In the second step, we apply the key concepts of smart money on the chart and identify fair value gaps, liquidity areas, and optimal trading opportunities.

Suppose the price makes a deep correction mitigating the fair valprice ue Gap area and grabbing the liquidity under these equal lows. In that case, we will have a perfect trading opportunity to go long.

Now when should we buy this pair?

We know this move is a short-term downtrend in the lower time frame, es so we will zoom into the lower time frame to look for reversal and trade entry

In the third step, we will wait for a change of character to confirm that the short-term downtrend is over and the market can continue pushing upward.

We will use two entry setups to open positions.

Number one, if the change of character creates fair value gaps, we will place our buy limit a spread size above the order block..,.

Number two, if we have no gaps, we will use the retracement levels and enter positions in the middle of the 618 and 786 levels. Stops will be below the swing low, and we can use multiple trade management strategies