Smart Money  (4/6)

Notes:

These indicators and concepts are specifically designed for TradingView.com

Settings and Indicator

Go into INDICATORS and type in Smart Money Concepts

SMC in Indicators

Go into Settings and follow these settings

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How they form

This is one of the shorter pieces as this follows the basic principles of support and resistance. Strong highs and strong lows, or if you see it elsewhere "premium" and "discount zones" are ranges that form when a recent major support and resistance has been established. Effectively these premium and discount zones form when the price made a major support and resistance. In addition there will be a gray "equilibrium zone" in the middle of the two premium and discount zones. This gray zone is actually the 50% mark of the fibonacci retracement which means that price reacts effectively off of this zone.

How to Identify Premium and Discount Zones

You can I.D these premium and discount zones as the strategy will automatically apply them for you. Here is an example below:

Highlighted in Pink are both the premium "strong high" and discount "strong low" zones (slightly covered by the display)

If you look in the middle of the green discount zone and the red premium zone, the gray equilibrium is plotted below.

Price has been hidden but as you can see the gray equilibrium zone is the 0.5 (185.98) or 50% fibonacci level (highlighted in pink box)

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How to trade

For a trading strategy, wait for the price to reach the Premium or Discount zones. Once this has happened, pull up the volume and, if the market's volume decreases, enter a trade and take profit at the equilibrium zone. We want to take profit at the equilibrium zone due to the fact that it is possible that the price rejects off of the equilibrium zone.

Other concluding remarks

While strong highs and strong lows are used synonymously it is important to recognize that both the ways in which you may call it react and are formed by the same principles: a strong support and resistance level that has shown within the relevant trading past based upon your timeframe. As long as you keep this basic principle in mind following the strategy of waiting for the price to reach the Premium or Discount zones you should be great

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