Smart Money Trading

Explanation

ICT smart money refers to the teachings of a trader named "Inner Circle Trader" or ICT. He has developed a range of concepts and tools to understand and trade the financial markets, one of which involves the understanding of "smart money."

According to ICT, "smart money" represents the actions of large financial institutions and other major market players who, due to their significant buying or selling power, can influence market direction. These institutions often have more information, tools, and resources at their disposal than the average retail trader. In the ICT methodology, the key is to understand and anticipate the maneuvers of this smart money to find high-probability trading opportunities. ICT posits that smart money often lays "traps" or "footprints" in the market which can be identified by those who know what to look for. These footprints can often be seen in sudden price reversals, stop hunts, and other market behaviors. By identifying these patterns, traders can align their positions with the anticipated moves of the smart money, rather than being caught on the wrong side of their maneuvers.

Key Things To Look For:

1. Order Blocks: An order block is a price level or zone where large orders were previously filled. These are significant because smart money often conducts their operations around these levels, leading to potential reversals or continuations.

2. Mitigation Blocks: These are levels where price returns after a significant move, indicating potential areas where smart money might have pending orders.

3. Stop Hunts: Smart money might push the price to levels where a large number of stop-loss or take-profit orders are placed, triggering them before reversing the price. Observing areas with likely clustered stops can help anticipate these moves.

4. False Breakouts: These are moves where price momentarily breaks a significant support or resistance level only to reverse sharply. It's seen as a tactic used by smart money to trap retail traders.

5. Market Structure: Understanding higher highs, higher lows (for an uptrend), and lower highs, lower lows (for a downtrend) can give insights into the potential direction of smart money moves.

6. Divergence: When price action differs from an oscillator like the RSI or MACD, it might suggest a potential reversal, indicating smart money might be preparing to change direction.

7. COT Report: The Commitment of Traders report can provide insights into the positions of large institutional traders, giving a glimpse into where the smart money is positioned.

8. Volume Analysis: A sudden spike or drop in volume can provide insights into potential accumulation or distribution by smart money.

9. Daily & Weekly Highs/Lows: Smart money often conducts its operations around these levels. Observing reactions around daily and weekly highs and lows can provide entry or exit cues.

10. Fibonacci Retracements & Extensions: These tools can provide potential areas of interest where smart money might place their orders or take profits.

11. Time of Day: Often, specific times of the trading day, like the opening and closing hours of major financial centers, can witness significant moves attributed to smart money activity.

Example of Tradingview Script

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