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How To Trade With Smart Money

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101 views3 pages

How To Trade With Smart Money

yes

Uploaded by

rajeshkgupta029
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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How to Trade with Smart Money

dotnettutorials.net/lesson/how-to-trade-with-smart-money/
Back to: Trading with Smart Money

In this article, I will discuss How to Trade with Smart Money with Examples. Please
read our previous article, where we discussed Thrust Pullback and Measuring
Move Analysis in detail. As part of this article, we will discuss the following three
important pointers in detail.

1. 3 Signs of Smart Money Activity


2. How to Trade with Them?
3. Odd Enhancer of Trading

How to trade with Smart Money?

We can spot three main signs of Smart Money activity with Price Action and volume
and trade with them.

1. Sideways Price Action Area


2. Aggressive Initiation Activity
3. Strong Rejection (of Higher or Lower Prices)

Sideways Price Action Area

Look for sideways price action areas. These are very significant places because
Smart Money is accumulating its positions there. Always watch for such areas, no
matter which timeframe you use. These sideways price action areas should be low-
volume to continue an existing trend.

Aggressive Initiation Activity


Aggressive activity is basically a significant price movement. It is caused by
aggressive buyers(SM) pushing the price higher or by aggressive sellers(SM)
pushing the price lower. This sort of aggressive buying or selling often takes place
after a sideways price action activity. What happens is that Smart Money builds up
its positions (in sideways areas), and when they are done with that, it starts
aggressive buying or selling to manipulate and move the price in any direction they
want. This is how they make money. They build up their positions slowly and
unnoticed, then start a trend to make those positions profitable.

When the price is moving quickly, there isn’t much time to place any more big
positions. For this reason, Smart Money needs to accumulate its positions before the
move. Below is an example of sideways price action areas followed by aggressive
initiation activity:

Strong Rejection (of higher or lower prices)

Strong rejection means sudden price reversal from either higher or lower price
levels. This pattern is made when the price goes one way aggressively and then
turns quickly, with the same aggression and speed going the other way. An example
would be a type of candle called the pin bar. But the pin bar isn’t the only visual form
of strong rejection. There are many ways a strong rejection can look like. A common
sign of all strong rejections is aggression and sudden reversal (2 bar reversal)

One side of the market (for example, buyers) is aggressive and moves the price in
one way. Then, it clashes with the other side (for example, strong sellers), suddenly
becoming stronger and more aggressive. So, the price turns quickly, and the
stronger side takes over. The area where the other side took over is significant
because it marks a place where strong market participants aggressively rejected the
current course of action and started a strong countermove. This place is significant
for us because it will most likely be defended again if the price gets near again. It
becomes a new support/resistance zone.

Here are some examples of strong rejections:


Remember, places where the price suddenly turned and changed direction are
significant. We should always watch out for them in our price action analysis

Odd enhancer for trading

1. Trading with the trend


2. Trading from supply and demand or support resistance level
3. Trading with the dominant pressure

TASK

Open the chart, find these three Smart Money activities, and analyze the
behavior. This strategy works on all time frames, from day traders to swing traders.

Trading with smart money is not a foolproof strategy and can be risky. It’s based on
the assumption that institutional investors are always right, which is not the case.
Furthermore, it might be too late to profit when retail traders identify smart money
moves. Therefore, it’s essential to conduct a thorough analysis and not rely solely on
the perceived actions of smart money.

In the next article, I will discuss How to Trade with the Supply and Demand
Zone in detail. In this article, I will try to explain how to trade with smart money using
some examples. I hope you enjoy this article on how to trade with smart money.

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