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Trade like SMART MONEY🔥| Smart Money Concepts Course | Most Awaited Season -2 | — Transcript

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0:03Hello traders, welcome back to the most
0:05awaited second season of the
0:07comprehensive course on smart money
0:10concepts. First of all, I would like to
0:12sincerely apologize to all my
0:14subscribers for delaying this season of
0:17SMC course. Please understand that it
0:19was not intentional as it took me a long
0:22time to do the research and write
0:25scripts for these episodes in an orderly
0:27manner that will make sense. I always
0:30prefer quality over quantity and I
0:32guarantee that you will love this season
0:35and it will change the way you trade
0:37forever. I have planned out the entire
0:40course into five seasons. In the third
0:42season, we will learn different smart
0:44money strategies. In the fourth season,
0:47we will focus on some of the forex only
0:49SMC concepts and strategies. And in the
0:52final season, we will discuss the rest
0:55of the smart money concepts. There won't
0:57be much delay between these new seasons
0:59because I have finished writing all the
1:02episodes. So don't worry about that. In
1:04this second season, however, we will
1:07learn different smart money concepts and
1:09a few strategies which can provide high
1:11reward to risk trading setups. I will
1:13try to explain each concept as detailed
1:16as possible in the most simplest manner
1:19as I can. I hope you are as excited as I
1:23am. Anyways, understanding these smart
1:25money strategies will require a decent
1:28idea of all the important smart money
1:31concepts that we have learned in the
1:32first season of this course. So, I
1:35strongly suggest that you go back and
1:37watch the entire smart money concepts
1:39playlist which is available for free in
1:41the channel where I have made detailed
1:44explanations of each of the concepts.
1:47Only after that should you start
1:49watching this season of the course. On
1:51the other hand, if you are someone who
1:53have already completed watching the
1:55first season and all you need is a brush
1:57up of some of the main concepts, then
2:00this video will serve your purpose. This
2:03video will help you recollect some of
2:05the most important smart money concepts.
2:07But let me tell you this will not just
2:10be a simple recap of the concepts.
2:12Instead, I will discuss some of those
2:14ideas which I have missed out on the
2:16first season. So even if you have
2:19completed watching the first season
2:20recently, you should still watch this
2:22video. With that being said, in this
2:25video I'll be talking about the market
2:27structure, the fractal nature of market
2:30structure, pullbacks, strong and weak
2:33highs and lows. I will talk about
2:36inducements, fair value gaps, different
2:39POIs or prices of interest, premium and
2:42discount zones and so on. So once again,
2:45welcome back to your favorite trading
2:47education channel. Just before we get
2:49into the serious part, show some love
2:51for the efforts and dedication put into
2:54bringing quality content. As always,
2:56your likes and comments matters the most
2:58in the growth of this channel. And if
3:00you're new here, I request you to
3:02subscribe to the channel for trading
3:04knowledge that will actually help you
3:06become profitable. Now, without wasting
3:08any more time, let's dive in. The
3:11biggest mistake I see traders make is
3:13that they don't understand what side of
3:15the market they should be trading on.
3:18Should you go long or should you go
3:20short? So the first and foremost lesson
3:22you need to understand is the
3:25identification of the smart money. In
3:27other words, it is about understanding
3:29the actual intended direction of the
3:32price. This is a very simple concept to
3:35understand. So essentially the idea
3:38based upon SMC is that at all points in
3:41time prices in the market are making
3:44higher highs and higher lows or lower
3:47highs or lower lows. It is either
3:49bullish or bearish. If the price is
3:52bullish, we will be looking only for
3:55buys or long trades. On the opposite, if
3:58the price is bearish, we will only be
4:01looking for sells or short trades. It's
4:04really that simple. Now how do we
4:07identify whether the price is bullish or
4:09bearish? This is where market structure
4:12comes into picture. Essentially market
4:15structure is what's going to indicate to
4:18us what direction the price is trading.
4:21This is how a textbook market structure
4:23will look like. This is usually the type
4:26of market structure that you have
4:28probably been taught in the price action
4:30videos. Obviously it works. But when we
4:33get into the realistic market structure,
4:36you'll understand it's not as simple as
4:39this. But anyway, let us take a look at
4:42the textbook market structure first. So
4:44if you look at any price move like this,
4:47you will see that price forms these
4:49swings or waves on it. And essentially
4:53you just want to map out all of these
4:55swing points and you'll notice whether
4:58or not they are trending upwards or
5:00downwards. So we will start off with a
5:03low then we have a high then we have a
5:07higher high. This new low formed is
5:10higher than the previous low. Therefore
5:12it is a higher low. This already in
5:15itself is indicative of higher prices.
5:18Right? So we have prices moving higher.
5:22So we have a low, we have a high, we
5:24have a higher low and then a higher
5:27high. So when the new high closes above
5:30the previous high, it forms a breakoff
5:33structure or boss. More specifically, it
5:36forms a bullish breakoff structure. In
5:39this case, the market is trending higher
5:42or the market is bullish. Therefore, we
5:45are anticipating the prices to trade
5:48higher, which in turn means that we are
5:51expected to buy or take long positions.
5:54Now once again the market creates a
5:57valid pullback and then moves up. At
6:00this point we can again expect higher
6:02prices. So another breakup structure
6:05will support this analysis and the
6:07market will form a new higher high. This
6:10won't keep going forever. At some point
6:13like in every market the trend will
6:16shift. At some point you'll be trading a
6:19bullish market trend like this. And then
6:21eventually you will have what we call a
6:24change of character. The change of
6:26character is essentially the shift from
6:29a bullish to bearish trend or it could
6:32be the other way around also where a
6:34bearish trend turns bullish. So the
6:37change of character is the first phase
6:40of a market reversal. So when you get a
6:43change of character like this then you
6:45can see that we have now gone from
6:47having higher highs and higher lows.
6:49Instead, now what we have is a lower
6:52low. From there, it's likely that we get
6:54a valid pullback and then prices form a
6:58lower high compared to the previous
7:00high. Meaning that this new high form
7:02right here is lower than the previous
7:05high formed. This is a clear indication
7:07of upcoming lower prices. Once again,
7:11when the market forms a new low which is
7:14lower than the previous low, then you
7:16have a breakoff structure. More
7:19accurately, this is a bearish breakoff
7:22structure. This forms a new lower low.
7:25So once you have a change of character
7:27followed by a breakoff structure, that
7:29is absolute confirmation that the trend
7:32has shifted. And in this case, it is now
7:36bearish. In a bearish market, we wait
7:39for price to pull back up into these
7:41levels and then we expect the price to
7:44trade lower. And our job as a trader is
7:47to identify how we get involved in these
7:50levels. In this case, we are expected to
7:53sell or take short positions. Now, yet
7:57again, if the price falls below the
7:59previous low and it breaks and closes
8:02above the previous lower high forming a
8:05new higher high, then this is another
8:08change of character towards bullishness.
8:11If the price pulls back forming a higher
8:13low compared to the previous low and
8:16forms a bullish breakoff structure
8:18forming a higher high then our bullish
8:21bias strengthens and we can now focus on
8:24trading long positions only. So when
8:27price is trending lower go short and
8:30when market is trending higher go long.
8:33It is that simple and this cycle will
8:36continue. Now these swing points formed
8:39in the market structure are identified
8:42as the external swing points or major
8:46swing points. These are the points that
8:48make up the external or major structure.
8:51So what you can see here is a high
8:54followed by a low then forms a lower
8:57high which closes below the previous
8:59high and the price continues to decline
9:02making a lower low forming a bearish
9:05break of structure. This confirms a
9:07bearish market trend. So our objective
9:10is to go short from any area of value
9:14like an order block, fair value gap,
9:16etc. after the market forms a valid
9:19pullback. Once again, the market forms a
9:22lower high followed by a lower low and a
9:25breakoff structure. But here the price
9:28trend shifted. Instead of forming a
9:31lower high and reversing after a
9:33pullback, the market breaks and closes
9:36above the previous high forming a higher
9:39high and a change of character towards
9:42bullish. Our bullish bias is strongly
9:45confirmed when the price pulls back
9:48forming a higher low compared to the
9:50previous low and then breaking above the
9:53previous high to form another higher
9:55high and a bullish breakoff structure.
9:58So our objective is to take long
10:00positions from any prices of interest
10:04like order blocks or fair value gaps.
10:06This is how we expect prices to behave
10:09in the future as represented by the
10:12dotted lines. First it should pull back
10:15to any area of value like an order block
10:18or fair value gap from where we can
10:20enter into long trade positions and then
10:23we can expect the prices to progress
10:25higher to achieve our target. Now you
10:28see this is a extremely basic version of
10:31the market price delivery. In reality
10:34the market price delivery is quite
10:36complex and advanced. Now this is how a
10:40real market structure would look like.
10:42You need to understand that this is more
10:44like what you see in the markets. But
10:46trust me, it is actually easier than it
10:49looks. Let's quickly break it down.
10:51Essentially, we are going to do the
10:53exact same thing. We are going to start
10:56from the high point up here to the low
10:58down here. So, we have a swing high and
11:01we have a swing low. Now, that is our
11:03baseline. Anything that happens within
11:06this is purely internal. Once you have
11:09identified the external or major swing
11:12high and low, then what you can do is
11:15draw a box or rectangle from this swing
11:18low up to the swing high. This way you
11:21can understand that any price moves that
11:24are now taking place inside of this box
11:26is the internal or the minor structure.
11:29So when you see that price is creating
11:31higher price swings like this, a lot of
11:34traders will make the mistake of trying
11:36to go long from these minor swings
11:39because they think that this was a break
11:41of structure and it is time that they
11:44should go long. But the truth is the
11:46structure still remains bearish. It is
11:49very clear that our high remains intact.
11:52And so what do you think will happen to
11:55these traders? Most probably the price
11:58will continue to trade lower and it will
12:00form a break of structure towards the
12:02downside and all these traders would get
12:05stopped out and once there is a
12:07structure break we can now look for our
12:10lower low. But before that we need to
12:13identify where our swing high is. Our
12:16old swing high was up here. Our new
12:19swing high will be the highest point
12:21formed before the price pulled back
12:23before breaking the structure. So the
12:25highest point is formed right here after
12:29the pullback before the bearish
12:31structure break happened. Now this
12:33becomes our new swing high. So we can
12:36expect the market to continue lower and
12:39respect this new swing high. Now once
12:41again we are expecting that price will
12:44come up and then trade lower from any
12:47prices of interest. Once it does that
12:50that is when price forms a valid
12:52pullback after a breakoff structure. We
12:54can then mark the new lower low and
12:57again price moves lower forming another
13:00breakoff structure and then again what
13:02do you observe? You can notice price
13:05pulls back up and then price trades
13:07lower. Another bearish break of
13:09structure is formed. And so what we can
13:12do is that we can capitalize on all of
13:15these price moves after the pullback
13:17which is in line with the current
13:19bearish trend. We can take short trades
13:21from any price of interest. I will show
13:24you exactly how to take trades from the
13:27upcoming episode onwards. So this here
13:29is a bearish price action or a bearish
13:32market structure. But at some point
13:35inevitably even though you're expecting
13:37prices to go lower the market trend will
13:40shift and price will start moving
13:42higher. Now as traders our duty is to
13:46adapt to such changes. So here the price
13:49has shifted from bearish to bullish as
13:52the market breaks above the previous
13:54lower high. So the price has just
13:56created a change of character. This will
13:59result in a higher high being found. In
14:02such cases, we want to trade long
14:04positions from prices of interest. Our
14:07job is to catch the reversal from these
14:09areas of value because you can notice
14:12that every time price shift, it forms
14:15these little reversals. We want to trade
14:17these reversals in alignment with the
14:20trend. That is the whole idea. So again,
14:23we know that price is going to now
14:26create a higher low after a pullback. In
14:29that case, we can confirm our new higher
14:31high and then again price moves higher
14:35and creates a bullish breakup structure.
14:38Now we are officially bullish. That's
14:40confirmed. Right? Now what else can you
14:43do? What you can do is essentially you
14:46can draw a box or a rectangle from this
14:48swing low up until this swing high and
14:51you can just drag this box across and
14:54the idea is that you can wait for the
14:56price to break out of this box. This
14:59method will help you distinguish between
15:01the internal and external market
15:04structures. So when price breaks out of
15:06the box, it obviously confirms a valid
15:09breakup structure. But as you can see
15:12here, there is price action happening
15:14inside this box. This is where most
15:17traders get trapped. Most of these
15:19traders lose money because they always
15:22get caught on the wrong side of the
15:23market. See, our external structure is
15:27bullish. But then we start to see prices
15:30pushing down lower like this. This is
15:32nothing but the minor structure. For
15:35some reason, many traders think that
15:37price is bearish because it's generating
15:40lower lows when in reality this is just
15:43a pullback which happens after every
15:45break of structure. Unaware traders
15:48think that this pullback is an actual
15:50structure and they get confused and most
15:53likely when they see another minor
15:56structure break they will try to short
15:58in these minor levels here and then what
16:00happens? they just get stopped out most
16:03of the time because they are on the
16:05wrong side of the market. I hope you
16:07understand. So it is very important to
16:10talk about these pullbacks. In fact, it
16:12is crucial to tell apart a real pullback
16:15from a fake one. A simple yet effective
16:18tool that can come in handy is the
16:21Fibonacci retracement tool. It can serve
16:23two purposes. It's like hitting two
16:26birds with a stone. It can be used to
16:28distinguish a valid pullback from a
16:31false pullback. Also, it can be used to
16:34determine the premium and discount areas
16:37within a major swing move that could
16:40help us buy low and sell high, improving
16:42our reward potential. Let's start with
16:45identifying deep pullbacks. Let's do it
16:48for a bullish scenario. Take a look at
16:51these higher low and higher swing high
16:53points. This is an external swing move.
16:56Now select the Fibonacci tool from the
16:58sidebar. You can start drawing from the
17:00swing low and drag towards the swing
17:03high point. The Fibonacci levels get
17:06plotted automatically. So a deeper
17:09pullback is a retracement that moves to
17:1338.2% to 50%age or even lower Fibonacci
17:17levels without closing below the swing
17:20low. So if it closes below the swing low
17:23level then it is no longer a valid
17:25pullback instead it is a change of
17:28character. This is very important to
17:30comprehend. So any pullback pushing
17:33below the 38.2%age Fibonacci level can
17:37be considered as a deep pullback. And a
17:40lot of the time BC price retracing back
17:43to this golden region uh which is
17:45between 61.8 and 78.6 6 percentage
17:49Fibonacci levels. This is usually a very
17:52strong sign. Now, only when the price
17:55moves higher after a valid pullback can
17:58we actually confirm a higher high.
18:01Likewise, we can confirm a higher low
18:04only after a valid breakup structure
18:07where the price has to break and close
18:09above the previous higher high level.
18:11Now, let's do it for a bearish scenario.
18:14For this, take a look at the lower high
18:17and lower swing low points. These are
18:19the major swing points of the external
18:22structure. Now, select the Fibonacci
18:24tool from the left sidebar. You can
18:27begin plotting the swing high and then
18:30drag it towards the swing low. For a
18:33deep pullback to happen, price has to
18:35retrace to the 38.2 percentage to 50%age
18:40or even higher Fibonacci levels. So any
18:43pullback going over the 38.2 percentage
18:46Fibonacci level can be considered as a
18:49deep pullback. But make sure that the
18:52retracement move doesn't break and close
18:55above the previous swing high. In such a
18:57case it is no longer just a pullback.
19:00Instead it is a change of character. Now
19:04once the price forms a valid pullback
19:06and reverses lower, we can actually
19:09confirm a lower low. In a similar note,
19:12a lower high is confirmed only when the
19:15market forms a bearish breakup structure
19:18where the price breaks and closes below
19:20the lower swing low point. Now there is
19:23another way of identifying a valid
19:26pullback. It is with the use of
19:28inducements. We will talk about this
19:30soon. But before that let's look at the
19:34second use case of the Fibonacci
19:36retracement tool. It is floating the
19:38premium and discount areas or zones. We
19:41will start with the bullish swing
19:43structure. The idea is the same.
19:46Identify the swing low and the swing
19:48high levels in the uptrend market
19:51structure. Select the Fibonacci tool
19:53from the menu. Start by plotting from
19:55the swing low and drag and proceed
19:58towards the swing high level. For this
20:00purpose, we will only require three fib
20:03levels. These are the 0%, 50% and 100%
20:07levels. You can go to the Fibonacci
20:10settings and adjust accordingly. So the
20:13region between 0% and 50% Fibonacci
20:16levels are considered as the premium
20:19zone while the area between 50% and 100%
20:22fib levels are considered as the
20:25discount zone. Since the external
20:27structure is bullish, our bias would be
20:30to take long trade positions. We all
20:33know the basic rule in trading. It is
20:35simply to buy at lower levels and sell
20:38at higher levels. With that in mind, we
20:42should try to take our long trade
20:43entries from the discount zones because
20:46we get cheaper prices there. On the
20:48other hand, prices are expensive within
20:51the premium zones. That's the whole
20:54idea. Now, let's quickly run through the
20:56case of a bearish swing structure. So
20:59here as always identify the swing high
21:02and the swing low. Select the Fibonacci
21:04tool from the menu. Start marking from
21:07the swing high point and proceed lower
21:09towards the swing low point. Our
21:11Fibonacci levels will be marked.
21:14Contrary to the previous case, here the
21:17region between 0% and 50%age Fibonacci
21:20levels is considered as the discount
21:22zone. While the area between 50%age and
21:26100%age Fibonacci levels are considered
21:28as the premium zone. Since we are
21:31bearish, our bias will be to sell or
21:34short at higher prices. Therefore, we
21:37should try to take our short trade entry
21:39from the premium zones because we get
21:42higher prices there. I hope you have
21:44understood the overall idea. Now, let's
21:48briefly talk about liquidity. In simple
21:50terms, liquidity is the fuel for price
21:53moves. Markets always move from one
21:56region of liquidity to another area of
21:58liquidity. Liquidity is just an area
22:01where there are stop- losses and pending
22:03orders waiting to be executed. We can
22:06find liquidity in areas or zones where
22:09many people place their stop- losses and
22:11limit orders which can either be buy or
22:14sell orders. So a market with a very
22:17high liquidity is one where there are a
22:20large number of buyers and sellers
22:23willing to trade in that particular
22:25asset. This means that there is a high
22:28availability of buy and sell orders
22:31allowing transactions to be executed
22:33quickly and with minimal impact on
22:36prices. There are two main types of
22:38liquidity based on market structure.
22:41These are major or external liquidity
22:44and minor or internal liquidity. In
22:47simple terms, major liquidity is the
22:50liquidity associated with the external
22:52swing structure. This includes the
22:55liquidity available near the major swing
22:57highs and lows, major support or
22:59resistance levels, daily, weekly or
23:02monthly highs and lows etc. Minor
23:05liquidity on the other hand is the
23:07liquidity available near internal market
23:10structures. This could be in the form of
23:12equal highs and equal lows, trend line
23:15liquidity, flag patterns, etc. Now,
23:18liquidity can also be classified based
23:20on direction. They are buyside liquidity
23:23and sellside liquidity. Buyside
23:26liquidity represents a level on the
23:28chart where short sellers will have
23:31their stops and breakout buyers will
23:33have their limit orders positioned. So
23:36essentially these are buy stop-loss
23:38orders set by short sellers who sold
23:40from the resistance or the swing highs
23:42and also buy limit orders set by buyers
23:45looking for a breakout above the
23:47resistance. So these are essentially buy
23:50orders. Now sellside liquidity is just
23:53the opposite. It represents a level on
23:56the chart where long bias traders will
23:59place their stop- loss. So essentially
24:02this cluster of orders will include
24:04stop-loss orders set by buyers who went
24:07long from the support level or swing low
24:10which in turn is a sell order. And it
24:13will also include sell limit orders set
24:16by those sellers who are anticipating a
24:19breakdown below the support or swing
24:21low. So in essence, the smart money will
24:24try to manipulate the prices in order to
24:27break through these obvious liquidity
24:29zones and seize or absorb the liquidity
24:32available there. This is called
24:35liquidity grab or liquidity sweep.
24:38Usually this is done in three steps. an
24:41accumulation phase where a large number
24:43of orders get clustered around a
24:46particular level followed by a
24:48manipulation phase where the smart money
24:50traps the retail players into taking a
24:53trade in the wrong direction. This is
24:56where the liquidity sweep happens and
24:58finally the price reverses direction
25:01taking out all the trapped retailers.
25:04This is the distribution phase. You can
25:07watch the detailed video on liquidity
25:10and how it works in the third and fourth
25:12episodes of the first season of our
25:14course. Anyways, now let's talk about
25:18inducements. The idea of inducements
25:21rely on minor pullbacks. It acts as a
25:24check to prevent traders from entering a
25:27trade position too early and helping
25:29them wait for a valid pullback to
25:31happen. The concept of inducement is
25:34very simple. An inducement is considered
25:37as the first pullback after a valid
25:39break of structure has happened. These
25:42pullbacks are minor pullbacks or
25:44internal pullbacks which can be formed
25:47using a single candle, a group of
25:49candles or even a deep wick. You can see
25:52different types of pullbacks that you
25:54can find on the charts here. So the
25:57whole idea is to mark the first pullback
26:00formed after a valid break of structure
26:03as our inducement level. This definition
26:05stays true despite the market trend
26:08being bullish or bearish. Now in certain
26:11scenarios, we might need to tweak this
26:13rule a little bit. Take a look at these
26:15bullish market scenarios. In the first
26:18case, we can see the price break and
26:20close above the previous major swing
26:22high. This is our valid bullish breakoff
26:25structure. Now let us see what happened
26:28after the breakoff structure. You can
26:30notice how the price moved higher and
26:32then it formed a minor pullback. As per
26:35our definition, the low of this minor
26:38pullback is our inducement level. We can
26:40draw a small horizontal line at this low
26:43to mark the inducement. For easy
26:46identification of this line in the
26:48future, we can name this line as IDM or
26:51you can also use a dollar sign for the
26:53same purpose. Then the price moved lower
26:57and broke below this inducement line.
26:59Only when the inducement level is taken
27:02out should we start thinking about a
27:04trade. Mostly the market will move in
27:07the direction of the existing market
27:09trend after taking out the inducement.
27:12Keep in mind that this does not have to
27:14happen immediately. Price can reverse
27:16after sweeping a liquidity area or it
27:19can reverse from an order block also.
27:22But do keep in mind that a price
27:24reversal after an inducement cannot be
27:26predicted with 100% accuracy. There are
27:30instances where the market could just
27:31break through the major swing level and
27:34form a change of character instead. Now
27:36let's consider this second case. In this
27:39scenario, we can observe that the price
27:41moved higher and it tried to break above
27:44the previous swing high level, but price
27:46didn't manage to close above the
27:48previous higher high. So, this is not a
27:50valid bullish breakoff structure. So, we
27:53cannot spot the inducement just yet as
27:56per the first pullback definition. Soon,
27:59the price did manage to break and close
28:01above the previous major swing high
28:03level, thereby forming a valid breakoff
28:06structure. After that price moved higher
28:08and formed a minor pullback. We can now
28:11mark the low of this pullback using a
28:14line. And this will be our inducement
28:16level denoted by IDM or a dollar sign.
28:20And afterwards you can see that the
28:21price return back to take out the
28:23liquidity below this inducement line.
28:26Now only after the inducement line is
28:28taken out should you think about taking
28:30trades from an order block or from an
28:33area of liquidity. Now take a look at
28:35this third case. In this case, it is
28:38clear that the price formed a valid
28:40breakoff structure. But as per our
28:42definition of inducement, the price
28:44didn't create any minor pullbacks after
28:47the bullish breakoff structure. The
28:49price moved higher with momentum. But if
28:51you look closely, you'll observe that
28:53the price did form a pullback just
28:56before the breakoff structure. So in
28:59such instances where there is no
29:01pullback formed after the breakoff
29:03structure, we will consider the last
29:06minor pullback before the breakoff
29:08structure as the inducement level and we
29:10can mark it using a line and name it.
29:13Now if you notice what happened next,
29:16you will see that the price returned all
29:18the way down and it took out the
29:20liquidity below the inducement level and
29:23then only it moved higher. So this is a
29:26special case where you have to make
29:28certain adjustments and just not blindly
29:31follow the textbook definition of
29:33inducements. Now take a good look at
29:36this last scenario here. The price gave
29:38a clean breakout above the previous
29:41higher high level. So it is a valid
29:43bullish breakup structure. Then the
29:46price moved higher and formed a minor
29:48pullback. So as per the rule we will
29:51mark it as our inducement level. Now
29:54instead of returning back to take out
29:56the liquidity, the market moved higher
29:59and then it formed another minor
30:01pullback. Now what will we do if such a
30:04scenario takes place? We should shift
30:06one inducement level forward to the low
30:09of this newly formed pullback. Even if
30:12the price doesn't take out this
30:13inducement level and if it moves even
30:15higher and creates another minor
30:17pullback then without any doubt we
30:20should shift our inducement line to this
30:23new swing low formed. This is yet
30:25another important tweak that you have to
30:27make in the concept in connection with
30:29the basic rule of the first pullback.
30:32Now as you can see the price returned to
30:34sweep the liquidity below the inducement
30:36level and then the market continued
30:39higher after absorbing the liquidity.
30:42Now the idea remains the same for
30:44bearish instances also. You can watch my
30:47detailed video on inducements to
30:49understand the finer details. Now in
30:52reality inducement levels are considered
30:55as smart money traps. This is because it
30:58induces retail traders to enter into
31:01short trades from an inducement level
31:04which is usually above any high
31:06probability price of interest or demand
31:08zones during a bullish market structure
31:11thereby inducing them to trade in the
31:13wrong location as well as in the wrong
31:16direction. In a similar manner, they
31:18persuade retail traders to enter into a
31:21long trade position from an inducement
31:23level which is usually below any price
31:26of interest or supply zones during a
31:28bearish market structure making them
31:31trade in the wrong location as well as
31:33in the wrong direction. It is just a
31:35trap to use them as liquidity. This is
31:39why it is always recommended to take
31:42trades once the liquidity associated
31:44with inducement level is taken out
31:46because once the price has swept the
31:48liquidity associated with an inducement
31:50level there are good chances that the
31:52price can reverse. Now moving on let me
31:55briefly talk about the concept of strong
31:58and weak swing points in a structure. To
32:01identify strong and weak highs and lows,
32:04we obviously need to identify our
32:07structure correctly. Are we bullish or
32:09are we bearish? In this case, we are
32:12bullish. Now, keep in mind this idea
32:15that the job of a high is to take out a
32:18low. Likewise, the job of a low is to
32:21take out the high. It is as simple as
32:24that. So if a low succeeds in taking out
32:28a high that low becomes a strong low. In
32:32a bullish trending market structure the
32:34market forms consecutive higher highs
32:36and higher lows. Here the lows always
32:39manage to take out the highs. Therefore
32:42the higher lows act as strong lows. Most
32:46of the time these lows are protected and
32:49as a result when price gets to these
32:51lows it will be met with some resistance
32:55causing the market to move higher. On
32:57the contrary these higher swing highs
33:00fail to take out the previous swing low
33:02levels. Therefore these levels are weak
33:05highs. Most of the time it is not going
33:08to hold and eventually price breaks
33:11through these highs. The only time it
33:13holds is when there is a market
33:15structure shift. That is if the high
33:18manages to take out the low thereby
33:20creating a bearish change of character.
33:23In this scenario, the previous low gets
33:25taken out and it represents a shift in
33:28control from buyers to the sellers. So
33:31now this high will become a strong high.
33:34Now there can't be two strong levels at
33:36the same time. Now this high is strong.
33:39Therefore, this low is already
33:42considered weak. It's like that saying,
33:44innocent until proven guilty. This low
33:47is weak until it is proven strong. This
33:50low right here would have to break this
33:52high to regain its status of being a
33:56strong swing level. Only when this high
33:58is taken out will the buyer be back in
34:01control over the market. But assume that
34:04didn't happen and the market moved lower
34:07forming a bearish market structure. In
34:09this case, the lower swing lows were not
34:12able to take out the highs, suggesting
34:15these are weak lows. On the contrary,
34:18the lower highs did their job by
34:20breaking through the lows, suggesting
34:22that these highs are strong highs and
34:26there is a very high probability that
34:28they will hold or in other words, price
34:31could face a strong resistance from
34:33these highs and the market could return
34:36lower. Understanding this concept will
34:38help us trade according to the market
34:40sentiment. It tells us when to switch
34:43between trends. So the entire idea of
34:46strong and weak swing points revolve
34:49around the concept of liquidity and
34:51shift between the control of power
34:53between buyers and sellers. Now let's
34:56quickly look at the concept of fair
34:58value gaps. In simple terms, a fair
35:01value gap is a three candle formation
35:04where the first candle's low does not
35:06overlap with the third candle's high in
35:09case of down move or where the first
35:11candle's high does not overlap with the
35:14third candle's low in case of an up move
35:17with a condition that the middle candle
35:19has to be a large bodied candle with
35:22little or no wick. A fair value gap
35:25represents an area where there was no
35:28efficient price delivery. It represents
35:31an imbalance in the buy and sell
35:33transactions leading to an inefficient
35:36price action in the market. So the idea
35:39is that the prices will return back to
35:41fill this imbalance or inefficiency in
35:44the market. This is what most traders
35:46would look for. Now a fair value gap
35:49that has not yet been tested by prices
35:52are called unmititigated fair value gap
35:55and those that are tested by prices are
35:57called as mitigated fair value gaps.
36:01Even though identifying a fair value gap
36:03based on the three candle rule looks
36:06very easy there are some exceptions to
36:09this rule which we need to consider. For
36:11instance, the internal consolidations or
36:15inside candle formations need to be
36:18considered while marking the three
36:19candle pattern making up a fair value
36:22gap. You can learn a lot more about fair
36:25value gaps, displacements, consequent
36:28encroachments, etc. on my detailed video
36:31on fair value gaps in the first season
36:33of this course. Moving on, let me now
36:36talk about order flow and order blocks.
36:39Let's begin with bullish order flows.
36:42During a bullish market, the major price
36:44structure forms higher highs and higher
36:47lows. But if you observe the corrective
36:49moves, you'll notice that it forms lower
36:52highs and lower lows. So a bullish order
36:55flow is represented by the last selling
36:58price move before the bullish price
37:00momentum or in simpler terms, the last
37:03selling move before the buy is called a
37:06bullish order flow. Therefore, all you
37:09have to do is to identify the bearish
37:11candles before the price begins to move
37:14higher. This is how we spot bullish
37:17order flows in the chart. Let us now
37:19learn how to spot a bearish order flow.
37:22You will find bearish order flow in a
37:24bearish market structure. In a bare
37:26market, the major structure forms lower
37:29highs and lower lows while the
37:31corrective move forms higher highs and
37:33higher lows. And the bearish order flow
37:36is represented by the last buying price
37:39move before the ongoing bearish price
37:41momentum or in other words the last
37:44buying momentum before dropped or sell
37:46is called bearish order flow. Therefore
37:49you need to identify the last bullish
37:51candles before the price began to drop
37:54lower. Now order flows can be classified
37:57into three types. These are mitigated
37:59order flows, unmititigated order flows
38:02and failed order flows. Out of these
38:05three, only the unmititigated order
38:07flows are of any use to us. An
38:09unmititigated order flow is one which
38:12has not been tapped into by prices or in
38:15other words, the price hasn't already
38:17mitigated the order flow yet. I have
38:19also presented scenarios for mitigated
38:22and failed order flows. Also, even
38:24though order flows can be used as
38:26potential trade entry zones, there are a
38:28few major drawbacks while doing so.
38:31First of all, the stop- loss will be
38:33considerably large. Since order flow is
38:36a zone or an area in the chart, we will
38:38have to place our stop- loss beyond the
38:40area or zone. Even then, we cannot be
38:43sure if the price would return back to
38:46hit our stop- loss. And because of a
38:48large stop-loss, the reward to risk also
38:50reduces. The reward to risk provided by
38:53an orderflow trading opportunity is much
38:56lower as compared to that given by an
38:58order block trading opportunity. Another
39:01problem with orderflow is that there is
39:03no proper entry criteria. Entering a
39:06trade position from an orderflow zone is
39:08mostly about our intuions and reward to
39:11risk considerations. Yet another problem
39:14which is committed due to human error is
39:16the wrong identification and marking of
39:18outflows. If you make the mistake of
39:21marking the order flow wrongly, then
39:23most probably the price won't return to
39:25mitigate it or sometimes it will fail
39:28the order flow. This is where order
39:31blocks come in. Order blocks are
39:33considered as a refinement of orderflow.
39:36Let's look at what the textbook
39:38definition of order blocks are. In a
39:41bullish market scenario, a bullish order
39:43block is identified as the last bearish
39:46candle before the buy. And during a
39:48bearish market structure, a bearish
39:50order block is considered as the last
39:53bullish candle before the sell. This is
39:56a vague way of explaining what an order
39:58block is and it is of very little use to
40:01a trader. The majority of order blocks
40:03obtained using this method are useless
40:06and it won't probably work. To identify
40:10and mark only valid and high probability
40:12order blocks, you will have to take into
40:15account seven important factors. Let me
40:17quickly run through these factors. The
40:20first point is that you should mark
40:22order blocks on higher time frames only.
40:25So if you are an intraday player then 15
40:27minutes can be your higher time frame
40:29and you should mark order blocks on this
40:32time frame only. Moving to the lower
40:34time frames such as 1 minute charts in
40:36order to refine your trade entry is a
40:39whole different game which we will cover
40:41in the upcoming episodes. Anyways,
40:44identification and marking of order
40:46flows has to be done on the higher time
40:48frame charts. The second factor is that
40:51there should be a valid breakoff
40:53structure. If you are in a bullish
40:54trend, look for a bullish breakoff
40:57structure. In this case, only look for a
40:59bullish order block. Instead, if the
41:01market structure is bearish, only look
41:04for bearish order blocks. Now third
41:07thing is to look for the last buying
41:09candle before the sell for a bearish
41:12market structure and look for the last
41:14selling candle before the buy for a
41:17bullish market structure as per
41:19definition. But certain conditions apply
41:21to this step. You need to make sure that
41:24this candle has taken out or swept the
41:27previous candle's liquidity. In simple
41:29words, you need to check if there is a
41:32liquidity sweep involved. This means the
41:34last selling candle that we have spotted
41:37should take out the previous minor low
41:39found. This also means that the next
41:42candle should not take out the low of
41:44the last selling candle. If the last
41:46selling candle was unable to take out
41:48the previous liquidity or if the
41:51succeeding candle takes out the low of
41:53our last selling candle, then we will
41:55not consider this candle for marking our
41:57bullish order block. The same concept
42:00applies to the last buying candle before
42:02the sell also while marking a bearish
42:05order block. Now the fourth important
42:07factor to notice is that there should be
42:09an imbalance or fair value gap involved.
42:12This imbalance should be formed after
42:15our last selling candle in case of a
42:17bullish market structure and it should
42:19be formed after our last buying candle
42:22in case of a bearish market structure.
42:24Another important thing to look out for
42:26is that there should be a proper
42:28inducement after the breakup structure.
42:31This step is to avoid traders from
42:33falling into the smart money trap. And
42:36the final factor to check for is to see
42:38whether the order block is associated
42:40with an unmitigated order flow. This
42:43will help you filter out most of the low
42:45probability setups. Usually after
42:48filtering you'll be most likely left
42:50with a minimum of one order block and a
42:53maximum of two order blocks between a
42:55particular swing high and a swing low.
42:58These are number one the extreme order
43:00block and the second one is the
43:02decisional POI or the decisional order
43:05block. The extreme order block is
43:07considered the high probability order
43:09block because it is the last resort for
43:12the price to make a reversal as there is
43:15enough liquidity and imbalance
43:16available. On the other hand, trading
43:19from a decisional order block is a 50/50
43:21bet. The overall idea when it comes to
43:24trading order blocks is to wait for the
43:26price to pull back to this price of
43:28interest and then wait for a reversal
43:31from this order block. This is where you
43:33can take a trade entry in the direction
43:35of the existing trend. But there are
43:38other nitty-g gritties that needs to be
43:40considered. I will talk about order
43:42block trading strategies in the upcoming
43:44seasons. Anyways, order blocks provides
43:47you with limited trades which are of
43:49high quality and have a high probability
43:52of success. Secondly, the reward to risk
43:55ratio is largely improved when using
43:57order blocks. This means the stop-loss
44:00setting is much tighter. The trade
44:02entries are also more optimized due to
44:05limited number of trades on offer. On
44:07the downside, a tight stop-loss can be
44:10taken out by volatile price swings. Now,
44:13this was just a quick recap of what an
44:16orderflow and order block is. But if you
44:18want to get a deeper understanding on
44:20these topics, I suggest you watch the
44:23comprehensive video on this topic in the
44:25first season. Now let's talk about
44:27another interesting aspect of the market
44:30which is the fractal market structure.
44:32It is one of those key concepts that
44:34helps you find high reward to risk
44:36rates. This concept lets you refine your
44:39trade entries using a multi-time frame
44:42approach. It is known as lower time
44:44frame refinement or LTF refinement. You
44:48might already know this. So it's nothing
44:50new but anyways let's break this down.
44:53What you see here is a 15-minut time
44:56frame chart. Now, I will bring up a
44:58series of zigzag candlesticks layered
45:01over the 15-minut chart. These
45:03candlesticks represents the 1 minute
45:05time frame. What you have to understand
45:07is that every time you have a very clean
45:10move like this on the higher time frame,
45:12a noisy price run like this is taking
45:15place on the lower time frame. For
45:17example, let's say in the 15 minutes,
45:19the market printed five candles like
45:21this. Then in the 1 minute time frame
45:24it's going to print a lot more candles
45:27precisely 75 of them and these are going
45:30to be a lot more erratic. So the first
45:33step to follow is to identify our bias
45:36based on the major structure direction.
45:39If the major structure is bullish our
45:41trade bias will be to trade long
45:43positions and if the higher time frame
45:46bias is bearish our whole objective
45:48would be to trade short positions. Okay.
45:51Now take a look at this 15-minut time
45:53frame structure. The market formed a low
45:56then a high followed by a higher low and
45:59then a higher high with a bullish
46:01breakup structure. At this point we are
46:04bullish. Then price break below the
46:07previous low forming a lower low
46:10suggesting a change of character. So now
46:12we are bearish. That is what the
46:1515-minut swing structure tells me. So
46:17keep in mind that as of now the 15-minut
46:20structure is bearish and these are our
46:23four major swing points. Okay. Now let's
46:26bring in the 1 minute time frame
46:27structure. You can see the 1 minute
46:29chart printing consecutive higher lows
46:31and higher highs during the initial
46:34impulsive move in the 15-minut time
46:36frame. It formed minor bullish breakup
46:38structures. Then in the higher time
46:41frame the price made a pullback. This is
46:44how the market moves. It moves as waves
46:47with impulse and corrective moves within
46:49it. But if you look at the one minute
46:51chart structure during this pullback
46:53phase, you will notice that the lower
46:55time frame structure is printing lower
46:57highs and lower lows. And as you can
47:00see, the price formed an internal change
47:03of character. This change of character
47:05or market structure shift in the lower
47:07time frame structure will give you a
47:10heads up about the pullback in the
47:1215-minut structure. So if you were
47:14already in a long position, this minor
47:17change of character will help you exit
47:20from the trade. Now again the 1 minute
47:23lower time frame structure formed minor
47:25bearish breakoff structures. Then as you
47:28can see the 15-minut higher time frame
47:30structure reversed higher forming an
47:33external bullish breakup structure. But
47:36if you notice carefully you'll find that
47:38the 1 minute structure has already given
47:41clues of a reversal. The lower time
47:43frame structure made a minor bullish
47:45change of character here. So this is a
47:48great sign for traders to enter into
47:50long trade positions. So the idea is to
47:53mark the higher time frame price of
47:55interest in the 15-minut chart. Then go
47:58down to the lower time frame 1 minute
48:00chart and then plot the lower time frame
48:02prices of interest areas to refine your
48:05analysis with a confluence setup. that
48:08is to look for overlapping areas in the
48:11prices of interest. Now once there is a
48:13change of character in the internal
48:15structure, you can take trade entries in
48:18the trend direction from these
48:20confluence areas inside the price of
48:22interest. So, a lower time frame fractal
48:25analysis will not only give you a heads
48:27up about the expected trend, but it will
48:30also help you refine your trade entries,
48:32thereby improving your reward potential
48:34and reducing your potential losses. With
48:37that idea in mind, let's quickly run
48:40through the rest of the chart and wind
48:41up this video. Look what happened next.
48:44In the 15 minutes time frame, there was
48:46a change of character towards
48:47bearishness. The price broke and closed
48:50below the previous swing low to form a
48:53lower low. Now focus on what has
48:55happened on the 1 minute structure. Just
48:57like the previous case, there is an
48:59internal change of character towards
49:01bearishness thereby printing lower highs
49:03and lower swing lows. It continued lower
49:06forming minor bearish breakup
49:08structures. Eventually, instead of the
49:11price making a pullback and reversing
49:13back from any price of interest, the
49:16price actually broke through the
49:17previous major swing level. After that,
49:20the market once again moved higher
49:22forming a pullback on the higher time
49:24frame structure. This pullback is
49:27identified much earlier on the lower
49:29time frame structure when it formed an
49:32internal bullish change of character.
49:34Now, if you have followed me through
49:36this video, you can easily predict what
49:38is going to happen next. It's simple.
49:41There is a good chance that the higher
49:43time frame swing high is going to be
49:45protected and that the price is going to
49:47reverse after it mitigates any price of
49:50interest. This reversal can be predicted
49:53when the price forms an internal bearish
49:56change of character in the 1 minute
49:58structure. You can look for short trade
50:00entries and trade in the direction of
50:03the higher time frame structure
50:04direction. Your target could be the next
50:07bearish breakoff structure level. I hope
50:09this concept is clear. So this was a
50:12quick recap on the most important smart
50:15money concepts. I know there are other
50:17concepts that we have already discussed
50:20but trust me these are the most vital
50:22concepts that you as a trader needs to
50:25master if you are going to use SMC for
50:27trading. You can always go back to the
50:29first season of the SMC course to
50:32refresh your memory. In the upcoming
50:34episodes, we will talk about different
50:36smart money concepts that we have not
50:38yet discussed and a lot more. I hope
50:41this video was informative. If it was,
50:44kindly consider giving a thumbs up so
50:46that I know you guys are interested in
50:48such content and I'll try to make more
50:51such videos. Hit that like button and
50:54show some love for the time and effort
50:56being put into making useful, orderly
50:59and practical content. Also, share this
51:01video with your friends and fellow
51:03traders. And if you have any doubts or
51:05queries, feel free to drop in a comment.
51:08And if you're new to this channel or you
51:10have not yet subscribed, please make
51:12sure to subscribe and also enable the
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51:17the latest video uploads. I will see you
51:20guys in the next video. Till then, bye.

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