Smart Money Trading: The Complete Strategy for Professional Trading

Why 95% of Traders Lose Money: The Answer in Smart Money

Most beginner traders use classic technical analysis with patterns, formations, and indicators. The result is sad: a high percentage of deposit losses. Why? Because major market players (Whales - banks, hedge funds, institutional investors) intentionally draw beautiful technical figures that the crowd wants to see, then turn them in a “illogical” direction, triggering stop orders of retail traders.

Here, the concept of Smart Money Trading comes to the rescue — a method of analyzing the behavior of large capital in the market. It’s not just technical analysis, but a completely new perspective on what’s happening. Large participants always act against the crowd’s expectations, manipulating asset prices in their own interests thanks to enormous capital under management.

Key Difference: What Makes Smart Money Successful

While ordinary traders chase technical figures, supporters of Smart Money Trading study the logic of large capital’s actions. Big players need huge liquidity to fill their orders. This is the “fuel” of the market, owned by stop orders of small traders, placed beyond support and resistance levels.

Whales hunt for this liquidity using various tricks:

• Impulse breakouts beyond trading ranges (Deviations)
• Creating false technical signals
• Collecting stops through minimal price updates

Those who understand this trade with Whales, not against them.

Market Structures: The Foundation of Analysis

In any asset, three main market structures operate:

Uptrend (Bullish trend): consecutive highs and higher lows without breaking them. Denoted as HH+HL (Higher High + Higher Low). Looks like an ascending staircase on the chart.

Downtrend (Bearish trend): the opposite, consecutive lows and lower highs. Denoted as LH+LL (Lower High + Lower Low). Visually — a descending staircase.

Sideways movement (Flat/Consolidation): the market moves without a clear direction, price oscillates between upper and lower levels of a parallel channel. This is often when Whales accumulate positions or wait for decreased interest in the asset.

Determining the current structure is the foundation of all trading decisions. Trading with the trend is much more promising than trying to catch corrections against the main movement.

Swing: Reversal Points

SWING — key reversal points on the chart:

Swing High — consists of three candles. The middle candle has the highest high, and the neighboring candles on the left and right have lower highs. Indicates a reversal down.

Swing Low — the opposite pattern. The middle candle shows the lowest low, and neighboring candles have higher lows. Signals a reversal up.

These points serve as support for identifying larger structural movements and help reveal liquidity gathering.

Structure Break: When Does a Change Occur

Break Of Structure (BOS) — updating the structure within the current trend. In an uptrend, this is a new high; in a downtrend, a new low. BOS confirms the continuation of the current phase.

Change of Character (CHoCH) — a trend reversal signal. It’s a stronger indication. The first BOS after a CHoCH is called “Confirm” and officially confirms a market reversal.

Structures are divided into primary (higher timeframes: 1W, 1D, 4h) and secondary (lower timeframes: 1h, 15min). Within a primary up structure, secondary corrections can be down, and vice versa. The optimal trading is trading with the main trend using secondary structures for entries.

Liquidity: The Main Weapon of Whales

Liquidity is the “fuel” of the market, necessary for large players to maneuver. In practice, it’s the stop orders of small traders placed beyond obvious support-resistance levels, behind candle shadows, beyond technical figure boundaries.

The highest concentration of orders is found beyond significant highs and lows (Swing High and Swing Low) — so-called liquidity pools. This is where Whales hunt, impulsively breaking these levels, filling stop orders, and accumulating positions.

Swing Failure Pattern (SFP) — a classic pattern where the price touches the previous Swing high or low but does not break it. Often a reversal signal. The best entry is after the SFP candle closes, with a stop behind its shadow.

Deviation: Going Beyond the Range

During sideways movement, Whales need additional liquidity outside the trading range. Exiting the price beyond the range is called Deviation (deviation).

Deviation often signals a reversal back into the flat. Traders enter on impulsive breakouts or on initial retests, placing stops behind the breakout wick.

When the price returns to the sideways corridor, Fibonacci retracement levels can be used: entering at 0.5 offers an optimal risk/reward ratio.

WICK: The Candle Shadow as a Liquidity Collection Signal

WICK — the candle shadow (tail) that breaks the liquidity zone on a SWING. Formed during sideways or trending (bullish or bearish) movements.

The shadow “extracts” stop orders from the liquidity zone, after which the price quickly returns to the main range. Entry is at the 0.5 Fibonacci level of the wick with a tight stop behind it — resulting in a nearly breakeven position with an excellent risk/reward profile.

Imbalance (Imbalance): Magnet for Price

Imbalance occurs when there is a disbalance between buy and sell orders. On the chart, it looks like a long impulsive candle whose body “tears” the shadows of the two neighboring candles.

This disbalanced space acts as a magnet. The market will tend to close this “gap” to restore balance. Entering at 0.5 Fibonacci of the imbalance yields good results.

Orderblock (OB): Large Trading Area

Orderblock — a candle where a large volume was traded by a big player. It’s a key liquidity manipulation point to fill a position. Whales may open a short-term losing position, showing a false move, then close it profitably.

Bullish Orderblock: the lowest bearish candle that absorbs liquidity.

Bearish Orderblock: the highest bullish candle with the same function.

In the future, OB acts as support or resistance — a magnet the price tends to move toward. The best entry is on retesting the OB or at the 0.5 Fibonacci level of the orderblock candle’s body with a stop behind its shadow.

Divergences: Price and Indicator Discrepancies

Divergence — occurs when the price direction diverges from the indicator (RSI, Stochastic, MACD, etc.). It’s a reversal signal.

Bullish Divergence: price makes new lows, but the indicator shows rising lows. Indicates seller weakness and a potential reversal upward.

Bearish Divergence: price makes new highs, but the indicator shows falling highs. Indicates buyer weakness and a potential reversal downward.

Hidden divergences also exist, with opposite patterns. Triple divergence is a very strong reversal setup. The older the timeframe, the stronger the signal. On lower TFs (1-15 min), divergences often break.

Volume Analysis: The Voice of the Market

Volumes reflect actual participant interest. It’s a measure of buying and selling over a specific period (per candle on a specific timeframe).

Rising volumes in an uptrend = trend strength. Sellers are surrendering.

Falling volumes while price rises = a sign of trend weakening and possible reversal.

Rising volumes in a downtrend = strength of the downward movement.

Falling volumes during a decline = weakening seller pressure, possible reversal upward.

Volumes are an additional factor confirming the strength of a move when making trading decisions.

Three Drives Pattern: Series of Movements Toward Reversal

Three Drives Pattern (TDP) — a reversal pattern consisting of increasingly higher highs or lower lows, usually forming in support/resistance zones.

Bullish TDP: series of lower lows in the support zone. Entry when price enters Support or after forming the third low. Stop below support.

Bearish TDP: series of higher highs in resistance zone. Entry at Resistance or after the third high. Stop above resistance.

Three Tap Setup: Touch and Rebound

Three Tap Setup (TTS) — differs from TDP by lacking the third more extreme high/low. The main goal is accumulation by Whales in support/resistance zones.

Bullish TTS: accumulation in Support zone. Entry on the second move (stop collection) or on the third retest of Support and OB of the second move. Stop below support.

Bearish TTS: accumulation in Resistance. Entry on the second move after a new high or on the third retest of resistance. Stop above Resistance.

Trading Sessions and Market Cycles

Main market activity occurs in three periods:

Asian session (03:00-11:00 MSK): usually an accumulation period when Whales start gathering positions. Moderate volatility.

European/London session (09:00-17:00): manipulation period — sharp moves to capture liquidity and stops. High volatility.

American/New York session (16:00-24:00): distribution period — Whales distribute positions. Strong movements.

Within a day, three market cycles happen: accumulation → manipulation → distribution. This helps anticipate large capital activity.

CME Chicago Mercantile Exchange: Futures and Gaps

CME (Chicago Mercantile Exchange) trades Bitcoin futures and other assets from Monday to Friday.

Summer time:

• Open: Monday 01:00 MSK
• Close: Friday 24:00 MSK
• Break between 00:00-01:00 daily

Winter time:

• Open: Monday 02:00 MSK
• Close: Saturday 01:00 MSK

Since classic crypto exchanges trade 24/7, BTC price can change significantly over the weekend. As a result, CME trading opens with a gap (price gap between Friday close and Monday open).

Gap — acts as a magnet for the price. In 80-90% of cases, gaps are eventually fully closed. Formation of a gap is an additional signal of the likely direction of movement (to close the gap).

Correlated Indices: Connection to Macro Markets

Despite the development of the crypto market, it still heavily depends on traditional financial markets:

S&P 500 (US stock index): positive correlation with BTC. Growth in S&P 500 usually accompanies Bitcoin’s rise and dollar decline.

DXY (US dollar index against a basket of currencies): negative correlation with BTC. Growth in DXY leads to BTC decline and overall crypto market decrease.

Ignoring these indices when analyzing cryptocurrencies is dangerous. Often, DXY movements explain confusing crypto market moves.

Practical Application of Smart Money Trading

Smart Money Trading provides traders with a clear tool to identify manipulations by big players. You will stop falling for beautiful technical figures and start seeing the true market logic.

With this strategy, you will learn to:

• Identify liquidity pools and moments of their collection
• Anticipate false breakouts and reversals
• Enter positions together with Whales, not against them
• Use precise entry points with minimal risk

Trading “with smart” is the path to professional trading and stable profits. Whales always make money because they understand this logic. Now, you can too.

Good luck in trading!

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