Thread by @mark_mcgrathh

How I use SMT Divergences🧵

In this brief thread I will be explaining

-What is an SMT
-How I use SMT Divergences
-Annotated Chart Examples
-Real Trade Examples

-Before I explain how I use SMT’s I would like to say that I will never take a trade based solely on an SMT divergence. I use it as a confluence tool

-I decided to write this thread as I really believe knowing how to use them can level up your trading.

Let's get started!

What is an SMT?

-An SMT (Smart Money Tool) is a crack in correlation between correlated pairs

-I use SMT divergences when I trade forex pairs like EUR/USD, GBP/USD and DXY

-This gives me an indication of the stronger pair to trade

-I will give a rundown of an SMT now!

Here is a chart of EUR/USD and GBP/USD, as we can see both of them have the same anatomy, when EU makes a lower low so does GU, when EU makes a higher high so does GU, so on and so forth.

They both have the same structure

Now, as we can see on this chart, EU fails to make a lower low whereas GU DOES make a lower low. This is a SMT Divergence.

So if I seen this on a trading day I would choose to take longs on EU, because the SMT shows it is the stronger pair

How I use SMT divergences

I use SMT divergences only as a confluence to my trades, so before I would check to see if an SMT is present I make sure 2 criteria are met which is

-Price has tapped into a HTF PD array (OB, FVG, Liquidity Sweep)

-A clear target / Draw On Liquidity

Here is a bullish example and bearish example

In both cases, I would choose to trade GU as in the bullish example it failed to make a lower low in comparison to EU

And in the bearish example it failed to make a higher high compared to EU

Here is an example of a SMT from just 2 days ago, as we can see there was an SMT with EU and GU, GU was the stronger pair and moved a quicker and a lot more frictionless than EU did, giving a faster move

The same SMT principles apply to pairs such as

-BTC / ETH

-ES / NQ

-XXX/USD / DXY

Here is 4 more trade examples for reference where I implemented SMT Divergences

I hope you all enjoyed this thread and took some value from it

Until next time lads🫡