SMART MONEY CONCEPT

BY JAY FOREX HOUSE

Simplified by
JayFX
 DISCLAIMER
This PDF is a combination of various smart money knowledge simplified and reviewed by
multiple qualified mentors. This file is for educational purposes only and not for sale. This
information is by no means financial advice and multiple back-testing and demo practices are
recommended before executing on alive account.

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 Introduction
This PDF will be covering various topics we recommend for both beginners and advanced smart
money traders.
The PDF file is divided into two parts. The first part will cover topics recommended for
beginners and the second for advanced smart money traders to trade ideas and execute them.
However, we recommend a full study of both sections as our methods and approach might be different
from that which you have studied as a beginner. Do well to take notes and study every topic
individually as this is a breakdown of every important information related to the smart money concept.
There is no file or visual study that covers everything related to the smart money approach
to trading. It’s about combining all the best theories to build the best trade ideas possible to
ensure confidence in your edge and consistency in your trading individually, which is the goal of
creating the study file.
Please note that we have included hyperlinks throughout the document, these can be used
to bring up the various charts in Trading View and to our educative handles.

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 Content
. Smart money concept Abbreviations
Section 1 (Beginner’s Smart Money Concept)
. Psychology
. Market structure
 Break of
structure 
Complex structure
. Timeframes
 Higher
timeframe  Lower
timeframe
. Liquidity & Types of liquidity
. Trade management

Section 2 (Advanced Smart Money Concept)

. Supply and demand
. Range
 Multi timeframe
. Strong/Weak Highs &
Lows  Strong
highs/lows
 Weak highs/low
. Inducement
. Imbalance and FVG
. Order Blocks & Reclaimed Order Block (Breaker Block)
. Order Flow
. Entries
. Targets

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 Smart money concept Abbreviations
Liquidity terms:
 EQH: Equal highs
 EQL: Equal lows
 TLQ: Trend line liquidity
 SLQ: Structural liquidity
 BSL: Buy-side liquidity
 SSL: Sell-side liquidity
Timeframe:
 HTF: Higher timeframe (4H up)
 LTF: Lower timeframe (1H down)
Structure:
 BOS: Break structure
 CHoCH: Change of character
 SH: Stop hunt
 LL: Lower low
 LH: Lower high
 HL: Higher low
 HH: Higher high
Candles formations:
> FU: Candle that runs liquidity
> Doji or Insidebar: Candle where price closes at the sametime it opens leaving wicks
on both sides
Other frequently used abbreviations SMC among traders:
 IMB: Imbalance
 IPA: Inefficient price action
 OF: Order flow
 PA: Price action
 POI: Point of interest
 FVG: Fair value gap
 RE: Risk entry
 SOS: Sign of strength
 SOW: Sign of weakness
 PWH: Previous weekly high
 PWL: Previous weekly low
 PDH: Previous daily high
 PDL: Previous daily low
 HOD: High or the day
 HOW: High of the week

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 Psychology
Psychology is the most important part of trading, believe it or not. Out of my
experience in trading and consistency, I am 100% positive about this information and confirm
to you that your mindset and personal theory play a very big role in every execution made by
you on your account.

Do we understand the impact our mindset has on the outcome of a trade? One trade
is not just one trade, it is essentially your future. One trade taken out of impatience, greed,
revenge, etc. and can lead to a loss which repeats the cycle of blown accounts which leads to
depression for a few days feeling like you are not "getting these concepts" but in reality,
YOU are the problem.

Trading is not an art form that people are just gifted with, it’s a structure, a process,
a concept that is taught to millions of people around the world and if you think the concepts
you are learning are wrong,you need to take a good look at how you apply them. Are you
playing by the rules?
Trading is not a hobby, this MUST be taken extremely seriously. Trading can only be
a part-time job or career. U cannot be trading for a fun cause, this is not a joke. A lot of lives
have been changed by trading likewise a lot has been destroyed due to impatience and
refusal to accept changes in their system. Why are we so impatient? Do you think I or anyone
has achieved anything working desperately? Hell no, cause I haven’t and u sure won’t cause
udon’tforce an act of experience that comes with the level of time and dedication you put into
it to come to you who is impatient & desperate. But I’m happy to let you know if you can
keep this aside, study, back-test, and have a suitable capital, returning to trading with the
mindset of an employee chosen to make board and bond decisions which have his future and
lifestyle of his generation on his shoulders.

Technical analysis won’t be so difficult for you to understand this, you have to
understand that NO one trades to pay a loan or to get an urgent fund and wins easily, NO one
trades without a plan and comes out consistent. If any of this is you, you need to get yourshit
together and ask yourself. What you’redoing, do you need to get your life straight first? Do
you need to work on yourself as a person before you tryout the hardest job in the world?

Now you have to treat every single trade like it’s your last like your family depends on
it. Keep the sloppy entries on the back-testing chart, and keep the unsure analysis on the
demo account. What you do in the community or on social media is great, but what you do
when the camera is off and your mentor is asleep or working on his success matters a lot in
your future in this business. You will only be taught the necessary skills needed for success. The
experience and effect of the knowledge depend on your hard work.

You have to develop a system that works for you with rules in place. So how do
we develop this system? The first thing that you need to have is a sound understanding of
the

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markets and how price moves, now you should have this already through previous education
and study of the smart money concept. Once you have a sound understanding of the price you
need to start developing your system. The easiest way to do this is by back-testing, back-
testing the system you want to trade, and making refinements based on the results. You’re
losing trades (yes we all do); what is the common factor?
You’re winning trades too. Your wins should always be 10 times greater than your
losses. And the only way you can achieve this is by having a solid rule of trading and back-
testing. You also need to be forward testing this as well, because results from back-testing
can be very different to live results. When you are trading a system that is showing you
profitable results, then it’s just about making small refinements and improving it where
applicable.

Other things that go into becoming a consistent trader. Consistently working out,
waking up early, and going to bed early. Now, these things help with improving your discipline
that go hand in hand with consistency. Taking breaks away from the charts is necessary, once in
a while. If you are feeling drained, unmotivated, or frustrated then it is essential that you
MUST take a small break from the charts until you are feeling better, let go and burn some
steam, return and back-test and you will feel refreshed and ready for action again. With
that aside let's get to business.

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 Market structure
When it comes to understanding the way the market moves the first thing we need
to have is a good understanding of the market structure. Now here I‘m not talking about the
logic behind the way price moves, this will come later on. Here I am talking about how prices
move from one point to another point. We all understand it doesn’t move in a straight line
so the structure is via HL’sand HH’s in a bullish market and LH’sand LL’s in abearish market.

There are only three ways the market could move, and that’s either a Bullish Trend,
a Bearish Trend, or Sideways (Consolidation). There is nothing more than this.
Bullish trend
. When the price is in a bullish trend, the price will make a higher high (HH) followed by a
higher
low (HL), to then break the high it has just put in a new high to form another higher high.

Bearish trend
. In a bearish trend, the price will be making lower highs and lower lows, so the price will
break the previous low and then put in a lower high.

The Golden rule of structure states WHATEVER WAY IT BREAKS IS THE DIRECTION
THAT IT WANTS TO GO IN. With this understanding, we should understand that we should
not go against the structure of our bias when trying to trade.

Here we identify price is making lower highs, and lower lows, and then changing
trends by making higher highs and higher lows. The structure is as simple as this. We cannot
however do this with the required precision if we are using just one timeframe. This is why an
overall view of the market is required. The multi-timeframe perspective of structure
from the higher timeframe to the lower timeframe. We will emphasize this when we are to
study the timeframe.

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https://www.tradingview.com/x/iXDzjVuc/

If we are ever confused we need to take a step back and take a look at what the
major swing highs and swing lows are doing. If price is making HH & HL, price is in an uptrend.
If LH & LL, the price is in a downtrend. If it’s not creating these then price is consolidating. So
you have to understand this is the foundation of trend direction, price follows the trend, and
trend follows direction, and directly follows structure so the structure is key.

So, always follow what the price is doing, and don’t try to guess what is going to
happen next. If the market is putting in HH & HL we are going to treat it as an uptrend until
the market breaks the higher low and puts in a lower high which becomes a change in trend
sowe call it a downtrend nothing more. In an uptrend, the main objective is to catch each
higher low. In a downtrend, the main objective is to catch each lower high. Catching low
points in line with the overall trend, enter at the low point and let the market do the work for
you through the flow and momentum of what is happening. Your main objective is to catch
higher lows for uptrend or lower highs for downtrend because the trend is your
friendsodon’t fight it.

Break of structure:
The break of market structure is the most manipulative period of the market.
What usually happens for beginner traders is that fear of missing out (FOMO) kicks in and
they start thinking the price is going to fly without a retracement, some naturally enter the
trade calling it a break-out entry or some other method of trading, but what most likely will
happen is that price will retrace back into premium or discount before we get any sort of a
proper movement.

When price breaks the highs or lows of the structure, we have a new range, whatever
way price breaks are the way that it wants togo so our focus goes to the newly created range.

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 When mapping structure, it is important to understand how to identify a true break
of structure. To map breaks of structure, I always look for a body close beyond the wick of the
low or high. Some traders prefer a body to wick close, some use the body to body break, and
some a wick to wick, but from my study and experience so far, I see a body to wick close as
the most efficient break of structure. See different types of structural breaks in the chart
below.

https://www.tradingview.com/x/mFlWY9o6/

Everything and every method of trading fall under structure. Retracements area part
of the structure. So pay attention to the premium or discount array for an entry, and not run
after structure.
Complex Structure:
The Market moves in structural form of highs and lows, but when it comes to a real
chart we see multiple highs and lows within the structure before the official high or low is
created. There is only one reason for this and that's because price repeats in structure onevery
timeframe. This comes under the study of internal and external structure. Combining our
understanding of both timeframes and structure helps to give us a solid foundation to
predict what is likely to happen within the markets. Once our swing points are defined, we
now have a strong base to work from, remember that each time frame will have its swing
structures high and low. The higher high of a 5min structure is aswing point of a 1min
structure. This might sound complicated now but it gets simpler as you study and practice. All
you need to understand is if the swing point of a higher timeframe is completed the internal
lower timeframe structure becomes liquidity.

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 A simple structure

A complex structure.

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 Timeframes

All of the timeframes in the market area representation of their data, which we can
use to identify high-probability trade if followed properly. We do this via a top-down
approach, by analyzing the higher timeframes first, then the lower time frames. One timeframe
is not enough for a full narrative behind a trade idea. You cannot just have it all done in the
M5 thinking you are aware of what is going on or what’s to happen next in the market. The
timeframes are there to be used together as one.

Higher timeframe:
If we are ever confused, we need to take a step back and take a look at what the
major swing highs and swing lows are doing, and for that, we look at higher timeframes. If
price is making HH & HL, price is in an uptrend. If LH & LL, the price is in a downtrend. If it’s
not creating these prices, it is a range form. The timeframes are the h4, daily, weekly, and
monthly if you’re a swing trader.

Once our swing points are defined, we now have a strong base to work from,
remember that each time frame will have its own swing point’s structure. For example, we
can have H4 swing points (HTF) then inside this we will have M15 swing points moving within
the H4 swing points. This is what we call the internal range of a structure, this also means the
H4 structure is also an internal range of the daily structure. Swing points and internal
structure range are covered more in-depth a little later, but just to give context to them, they
are the areas that cause new highs or lows. If you can’t make sense of a timeframe, go up, there
is always a cleaner point of interest of structure on the higher timeframe you just have to look.

Lower timeframe:
We use 4 different types of structures for different timeframes. These are Swing,
Minor, Sub, and Change of Character (CHoCH).
A ChoCH is the first time an LH (bullish CHoCH) or HL (bearish CHoCH) gets taken out
ON THE LOWER TIMEFRAME. We use it to spot the first shift in structure. It’s only used within
HTF POIs, relative to the timeframe you are on, and is only a break of structure on the lower
time frame, It’s the only time we will use wick breaks and very minor structure that we
would not usually look at (e.g. an inside bar.) Being aggressive with this allows us to get in
at the first available opportunity.

When spotting a change of character, you should always look at a sweep of liquidity
into the higher timeframe poi (like a QM also known as a stop hunt of the previous LL (bullish
CHoCH) or HH (bearish CHoCH). This is a lower timeframe shift in trend to then break
the higher timeframe structure (Swing or Sub) Structure. A Minor break of structure (CHoCH) is
NOT enough

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to confirm a complete change of overall directional bias of the swing structure, it could also
be just an input of a new leg of the swing structure.
There are two types of CHoCH, one that doesn’t break substructure before aretest.
Which I consider a risky CHoCH. The 2nd which breaks the substructure before aretest of our
supply or demand zone.

Change of character 1

Change of character 2

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https://www.tradingview.com/x/SfJRP2I2/
A type 1 change of character live chart.

https://www.tradingview.com/x/PG5zlwzO/
A type 2 Change of Character live chart

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 Liquidity and Types of liquidity.
Liquidity:
Liquidity, in my view, is one of the most misunderstood and misused concepts in
trading. Underrated and misinformed to retail traders. Most retail traders forget we are the
liquidity and they are hunting for our stop losses. Now how do we find liquidity if we are
liquidity?
With this in mind, we should understand we don’t anticipate sweeps on liquidity or
stop- hunt, we react to them. We don’t tell them where to react, we follow their reactions
from our point of interest.

Liquidity in terms of smart money trading is an obvious point of interest that we

expect learners and beginners of different methods to fall into. Examples of things are trend
line, double top, equal highs, and obvious order blocks without liquidity below (bearish) or
above (bullish) them. (Yes, order blocks when picked wrongly are liquidity and will be stopped
out.)

Types of Liquidity
As listed above we have multiple methods we could use to view liquidity. Below
are breakdowns of each of those methods and how we could use them.

> Equal highs and lows (EQH/EQL): Equal highs or lows are seen as large poolsof LQ
because Retail support and resistance traders see that as support or resistance, and the
algorithm would intend to stop them before heading in the initial direction of the market.

Equal highs and lows trading.

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> Trend line Liquidity (TL) : Trend lines act as ‘support’ with orders resting below them.
Most Falcon traders use this type of liquidity trading and the algorithm knows them and
sometimes creates them within an internal structure to get them trapped as liquidity.

https:// www. tradingview. com/x/6 oR9 Qoho/

TRENDLINE (TL) liquidity trading.

> Structural Liquidity (Internal and External liquidity): Now this shouldn’t sound weird to
you, Yes, even structure range acts as liquidity once the structure has completed its intention
of the higher timeframe range direction. In this, we have two types of structure liquidity
INTERNAL & EXTERNAL structure liquidity.

. Internal structure Liquidity:

Now we know that structure is fractal and moves in a zigzag, and every zigzag has a
little structure within it, now once the higher timeframe structure intentions have been
completed, the lower timeframe structure will become liquidity and the swing highs or low of
the internal structures have buy-stops and sell stops resting above them. And the algorithm
will target the internal structure swing highs and in the same process test the premium
(bearish) or discount (bullish) of the newly formed range.

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https:// www. tradingview. com/x/ ocAKAH6m/
Live example of a bearish break of the daily structure and the H4 internal structure being
stopped out into the premium of the newly formed daily range.

https:// www. tradingview. com/x/ CSn3 uHYf/

A Daily bullish breaker out, in which the H4 internal Structure swing lows are being used
as liquidity for the algorithm.

Here are some tips to help you identify the internal range swing point.
 The weekly is an internal range of the monthly structure.
 The daily is an internal structure range of the weekly.
 The H4 is an internal structure range of the daily.
 The H1 is an internal structure of the H4.

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. External structure Liquidity
Every weak high/low in the market is external range liquidity and the algorithm
would target them once the intentions of the internal liquidity hunt have been
completed. So external range structures are weak lows/highs which are against the trend
or failed to break the strong high/low.

Most popular liquidity patterns.

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 Trade management
This might look less important but plays the biggest role in trading, we need to have
strict rules, rules we do not break at any cause. You have to develop a system that works for
you with rules in place. So how do we develop this system?

The first thing that you need to have is a sound understanding of the markets and
how price moves, now you have the education with this article, but without rules, this
becomes useless in the market. Because once you are in a trade, it is generally much
harder to make objective decisions on profit taking.
We start to believe the trade will run forever in profit and it becomes much harder to
find realistic targets for your trades. Once you have a sound understanding of price action, you
need to start developing your system. The easiest way to do this is by back-testing the system
you have learned and making refinements based on the results. Your losses will teach you
a lot and improve your experience as a trader, as long as you stick to your rules. Back-testing
and making case studies will massively help improve your ability. Set a few hours aside on
weekends and go through the weekly price action (PA) over your watch list pairs.

To improve as a trader, you need to be willing to be consistent in your process,

this includes psychology and personal development. Consistency doesn't just come from
sitting in front of the chart everyday. You need to be putting in the work in and out of trading.
You need a systematic approach to the markets for every trade you take. Now every trade will
be different, but you have to apply the same approach to every trade, day in and day out
trading.

IF YOU’RE SWEATING WHEN A TRADE IS ON, IT’S EITHER YOU BROKE A RULE YOU
MADE OR YOU’RE SIMPLY GAMBLING.

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 Section 2
(Advanced Smart Money Concept).

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 Supply And Demand
Supply and demand create price action, price action creates patterns. I think the best
way to start the topic would be to reveal to you what the most important factor is in trying to
identify a supply or demand zone.
Supply is simply the amount available, while demand is the amount that is
wanted. Supply is the amount available at a particular price, while demand is the amount that
is wanted or desiredata specific price, now this doesn’t sound like the old point of interestshit
right? That’s because supply and demand is a method or you could say a theory of its own.
Supply and demand define the strength of the market, they are what give us all
the information we see. Everything we see on the charts happens because of one thing,
the interaction between supply and demand e.g. structure, momentum, liquidity, trend,
impulses, corrections, etc.
We view supply and demand in much the same way as we view structure. If a market
is bullish, demand is in control, if bearish, then supply is in control.
We can see areas of unmitigated supply and demand in previous legs of price. These
are bullish candles in a bearish leg that break structure or viceversa. A supply or a demand
zone is not just an Order block and an Order block is not just a supply or demand zone.
Some aspects that relate them to each other, and a few very important things we can
learn from:
✔ An order block is formed within a higher timeframe supply or demand zone.
✔ A Supply zone could also be refined into an order block as a point of
interest.

Basic drawing of supply and demand.

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 A Supply and a Demand Zone chart view

A Demand zone refined into a lower timeframe Demand zone

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 A Supply zone refined a lower timeframe supply zone.

Now, none of these zones are called order blocks, because they are not order
blocks. These are supply and demand zones and can also be called the area of interest in the
market. These are the areas where we want to monitor the interaction. Will the price pull
back? Will it reverse? Will we see a reaction? Etc... They are generally called POI or AOI (point
of interest or Area of Interest).

https://www.tradingview.com/x/02TNeOe4/
A Supply and Demand zone.

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 RANGE

Ranges are everywhere in the market every structure is made out of a range. The
zigzag movement of the market is called range. Each zigzag created is called the range of the
structure, And being able to understand them is key.

How to identify internal & external Range.

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 Range of a structure:

The only way the market makers or institutions can slowly manipulate the market
and discreetly accumulate their positions and liquidate it, is in the internal range of structure.
Price action is also known to us as a range. There they can hide their activity perfectly. If we can
identify this happening at the moment we will be trading with the Institution and catching them
in big RR trades.

Multi timeframe
The time frames and data are key to finding those high-probability
trades. Below are the most significant time frames for top-down analysis.
✔ Monthly – for trend and direction.
✔ Weekly – for counter direction and obstacle.
✔ Daily – structure.
✔ H4 – point of interest.
✔ H1 – for break-out and lower timeframe structure shift.
✔ 30m, 15m, 5m, and 1m = lower timeframe structure and internal range liquidity.

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 A multi-timeframe structure view.

A multi-timeframe structure.

On the diagram above we can see how an H4 leg looks with the 15M, 5M, and
H1 structures. Therefore, using time frames as key, when the M15 may seem to have changed
the trend, it might just be a pullback into an unmitigated supply zone on the H4 before we
continue with the bearish leg so you have to be a timeframe traveler. The time frames are
your friends, make use of them.

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 We can of course play the pullback, but we need to be aware it’s simply a pullback
and we need to mark out reasonable targets, and not get trapped in the wrong direction.
Once the M15 goes back bearish we can then see how aretracement was introduced before a
continuation occurred to allow the HTF intentions toplayout on the H4 narrative expecting a
new low to form. The same way it did within the M5 and H1 structure marked on the diagram
below.

https://www.tradingview.com/x/POEmaQi4/
Live chart of a multi-timeframe structure.

https://www.tradingview.com/x/tICLOWFk/
Live chart of the 15m, 2h, and 4hstructure.

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 Strong/weak High and low

Strong highs/lows:

Strong highs and lowson the lower timeframes will be created when we see an
aggressive move away from a point of interest. This fast and aggressive reaction will be our first
sign of price creating a strong high or low, then we want to observe for a break of structure.
When looking at strong highs and lows we want to see two things: Have we seen a fast
and aggressive move away? Did the move break the swing structure (swing high/low)?
STRONG HIGHS AND LOWS.

When looking at these strong highs and lows you want to focus on the aggression
and momentum at these highs or lows. Rather than looking for a certain pattern, focus
on the aggression and the momentum as this is what matters. When we do have strong highs
and lows, this essentially means that the price shouldn't break above these highs/lows until we
have seen a break of structure and momentum shift against these highs and lows. Once the
price has put in a strong high or low, we want to be trading in line with these especially when
they are coming from a higher timeframe POI, meaning a change in trend is expected.

Qualifications of a strong low

 A strong low has to break the swing high that created it.
 A strong low has to beinan impulsive move.
 A strong low has to becoming from a significant Point of interest and within a discount of
the higher swing range.

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 Qualifications of a strong high
 A strong high has to break the swing high that created it.
 A strong high has to beinan impulsive move.
 A strong high has to becoming from a significant Point of interest and within a discount
point of the higher swing range.

Weak highs/lows:
Weak highs and lows are the opposite of strong highs and lows. These will have weak
rejections and will be very slow with a little momentum behind the move. Usually, these will
be corrective moves back into the discount (bullish) or premium (bearish) zone of the strong
high/low before we see another impulsive move forming a new range.

Qualifications of a weak high/low

1: Slow move away and lacks any real momentum
2: Failure to breakswing structure
3: Always against the strong high or low.

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 Inducement
The name inducement in trading just means inducement. Simple as that “these are
just liquidity set to induce retail traders into doingshits”. Essentially, inducement includes the
money waiting to be liquidated, which are Stop Losses, Limit Orders, Stop Orders, etc.
Therefore Stop Losses are seen as an inducement (Liquidity). Because they are liquidated and
at some point to make a high volume of activity exist in the market. Since it’s what keeps the
market moving (i.e. Liquidity) the market naturally gravitates to Liquidity Areas.

When looking at an area of ‘liquidity’, what we are seeing is a large number of

orders resting at certain structural levels. For example, when viewing equal highs liquidity, what
we see is a large amount of buy stop orders (sell stops, or breakout trader’s orders waiting for
the price to break, for them to join the trend above these highs). When these highs get taken,
we know that these buy orders need to be filled with sell orders, so in essence, we are seeing a
large area of supply being fulfilled. The same is true for Sell Side Liquidity, we are seeing a large
area of sell stop orders being fulfilled, so a large area of demand.

Inducements are the key! We have to understand that. What is the most popular
shit among retailers? (Support and resistance, Qm, head and shoulder, trending, order blocks,
etc.) These are all retail patterns that are common and easy to find in the books and on the
chart. Now we want to see a stop hunt of these patterns because they have been
programmed into the algorithm and the algorithm is there to induce and stop us out. This is one
of the reasons you see price hitting your SL and still goes in your direction to take profit (TP).

Examples of inducement

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https://www.tradingview.com/x/wv1gx6cq/
Live example 1

https://www.tradingview.com/x/lKUIZYkt/
Live example 2.

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https://www.tradingview.com/x/nzQbW8hX/
3. Live Example

https://www.tradingview.com/x/53iMZKRg/
4. Live Example

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 Imbalance and FVG
Imbalances are also known as inefficiencies. Inefficiency or imbalance relates to when there is
a manipulation in the market and this means that there is only one type of order going into
the market so these will either just buy or sells. The market always needs to be “fairly”
delivered, that’s why they come back to these zones to fill these Imbalances. What this causes
is a skip of liquidity and we will see the price coming down and either fill it to the 50 % or
fully. They are areas in which not all orders were delivered in the order books. So orders were
left behind and the market will fill them at some point in time.

The most important uses of the Imbalance

> Now when we see inefficiency above/below one of our ranges it is good for us because it
Essentially gives price another reason to come back there and mitigate our range or point
of interest.

> When an imbalance has been filled and part of it is left behind this is called the Fair value
gap (FVG) which would be used to induce the point of interest above or below it.

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https://www.tradingview.com/x/BpBKpOPo/

> When trying to pick the 50% imbalance to trade from, try to identify if a breaker block
(Reclaimed order block) is present in the previous range, at the 50% of the imbalance. As
this would make your point of interest highly probable.

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https://www.tradingview.com/x/juUJnnVx/

https://www.tradingview.com/x/GDk68Pbs/

Both charts above show you how efficient what u have learned so far can be. Combination of
our knowledge so far making use of multi-timeframe structure, liquidity, supply zone,
premium /discount, and strong highs and weak low. You can see how efficient this knowledge
already is, you should have an understanding that what you have learned already with the
concept of liquidity would and strong/weak highs and lows added to the structure is all that
we do and everything below this are break down of this particular method. Back-testing this
and training your eyes could help you understand any other sub-topicon the smart money
concept.

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 Order block
Now I know those above look a lot like the order block you have been taught in the
past, but they are not order blocks but just supply and demand zones. That being said, what’san
order block?
Order blocks were first introduced by the inner circle trader (ICT). According to
his description of an order block, this is the area of price action which caused the manipulation
that clears liquidity. Which isn’t just any last bullish or bearish candle seen anywhere in the
market but a significant one that clears out liquidity. Making sense now? It can also be
described as an unmitigated or open position of the big players or the institution, which was
used to manipulate the retail traders from the position. Yes, it’s probably the last bullish or
bearish candle before the momentum, but that’s not the reason we are calling it an order
block.

Diagram of a bearish order block.

A diagram of order blocks used properly with structure and liquidity.

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 Reclaimed order block (Breaker block)
Breaker blocks are order blocks that failed to hold, most of the time because the price
hit a higher timeframe reversal point or the order block was a counter-trend OB and the price
was ready to flow with the trend again.

How to trade a breaker block:

Most of the time price reacts to the breaker for the same reason it would react to
an order block (LIQUIDITY). Now the major reason we pick an order block or a breaker is
because of the liquidity created to induce traders. The order block or breaker is the closest
point of interest above the liquidity on a bullish poi or below on a bearish poi. And don’t forget
the FVG.

Patterns for a Bearish Breaker block from supply and demand.

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Patterns for a Bullish Breaker block from supply and demand.

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 Some important facts when trading order blocks and breaker blocks.

. A bullish order block or breaker block should be picked at the premium, supply zone
of The higher timeframe.
. A bearish order block or breaker block should be picked at the discount, demand zone
of The higher timeframe.
. When looking for a breaker block, when a supply zone fails to hold and becomes a demand
(Flip zone). This becomes a breaker block poi of the full range, and we need to understand
that,
. A breaker block mitigation is a temporal trend as it’s just the inducement created for the
Order block above it, price 80% of the time would return to takeout the mitigation of the
breaker block in the order block.

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 Order flow
Using the higher timeframe structure and multi-timeframe analysis to confirm and
refine the analysis. We will understand the order flow on the HTF which allows you to trade
the ‘in between’ inter-day structure and hedging direction a bit easily and freely. You
want to understand the mitigation point, break of structure and liquidity grab, and
clean strong movement to identify entry opportunities. This is what we call order flow.

Bullish order flow

Bearish order flow.

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https://www.tradingview.com/x/6WE9s2Lh/
Bearish lower time-frame order flow

https://www.tradingview.com/x/X7g3svx8/
Bearish to bullish order flow.

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 Failed to break structure.
When we have a price failing to break structure is when price action is telling us that
it's not ready to go higher (bullish) or lower (bearish) yet, we can then exit our trade and
save ourselves from a loss. If you still trust the setup, all you can do is reduce your risk and
hold.

This is why understanding the narrative of the higher timeframes and overall context
is essential. Understanding the momentum, range, and internal and external structure is
very important. Where do we have liquidity, where do we see choch, where are we
(premium or discount)? Do we have one of our patterns above/below our entry?
Understanding these points will allow us to know when to cut our trades and when to hold,
when to hedge, or avoid the market.

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 Entries
There are two types of entries in a trade the first way is by using limits and the
second way is by entering based on the reactions and changes in structure. They are namely
aggressive and confirmation entries.
Aggressive Entries.
The aggressive entry is very self-explanatory and that is simply setting a limit atour
higher timeframe entry point or point of interest.

An aggressive entry pattern.

Aggressive entry on the daily timeframe.

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 Confirmation Entries

The confirmation entry is more complex and this is taking an entry based on the
reaction to our point of interest. When taking a reaction based on a mitigation reaction,
we want to monitor LTF price action for a change in sentiment to align with our trade idea.
Ideally, we want to see liquidity built and swept, followed by CHoCH aligning with our direction
before taking an entry.
We need to understand that true mitigation comes mostly from the 50% and
the mitigation of the open is only to be counted if it breaks the lower timeframe structure.
With this being said, we need to wait for the point of interest to be mitigated and then we
assess the aggression following the mitigation which breaks structure giving a change of
character. After which, we enter based on the return into premium (bearish) or (discount) of
the newly formed lower timeframe range. We will then simply place our stop above/below the
high/low, and a lot of the times, this will give usa higher R: R ratio. This will also save us from
our stops completely getting blown because if we don't see the reaction that we want to see,
we simply won't enter. However, if we miss the initial entry, we can still take continuations
once we see the narrative playing out. Continuations are often the safer entry, as the
market is already trending at this point, instead of us anticipating the trend. We need to
be more conservative with targets, however, as we are not as well positioned in the trade as
we would like to be.

Confirmation Entry pattern.

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 Confirmation entry chart.
Waiting for price to give a significant bearish reaction from your bearish point of interest in
a bullish trend is what confirmation entry is all about.

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 Target
This is as important as entries. You need to know when to hold, where to get out of
your trade, and not leave your profit laying around. There are a few ways you can set targets
in the market, it is up to you to test which method works best for you.
The first way you can set your targets is based on:
● Risk to reward R:R. Now, this is a very systematic and mechanical way to set your target as
Every trade will have the same target. The method is very efficient for scalpers looking for
10- 20pips, it’sa mechanical way of setting targets that are guaranteed to make you profitable if
you stick to your rules and R: R. If you are basing your targets on R: R keep it between 3-5R,
anything above 5R can be inconsistent and you will experience trades turning on you. Using
this method it's always a good idea to leave a small runner once youreach your expected
reward.
The second way you can set your targets is based on:

● Liquidity and weak highs/lows: So in terms of the liquidity approach, you will besetting
your Targets the weak lows or the internal swing lows. These liquidity points will always be hit at
some point, so we know that these will be hit, however it doesn't mean that these will betaken
straight away. If we are using weak highs and lows following our HTF momentum shifts,
we will be targeting the weak highs/weak lows on our HTFs. If we do experience a true
momentum shift then these weak highs/lows will be broken and this is most common among
swing traders.
The last method you can use for setting your targets is simply placing them at
an unmitigated delivery point of interest. Essentially if you are using this method, you will be
trading from one unmitigated POI to another unmitigated POI. This way, you will betaking
advantage of larger moves that will give you higher R: R. However it is more difficult in
terms of trade management as you will be in the trade longer, you will also have to decide
where the best place is to take partials.

Each of these methods has its pros and cons. What you have to do is back-test
each method and see what works best for you and fits your personality.

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 Some study charts.

https://www.tradingview.com/x/w35NuyyC/

https://www.tradingview.com/x/ncY4om42/

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 To know more about the author of this file check the link below;

. Telegram channel for more breakdown of each topic in charts and daily
ideas:
Link:https://t.me/JayFxHouse
. YouTube channel for the visual study of this concept:
Link:https://youtube.com/channel/UC6H1kBkgPKYIAg5DSvqUMzw
. Crypto technical channel:
Link: https://t.me/JayCryptohouse

THIS PDF FILE IS NOT FOR SALE.

SIMPLIFIED BY JAYFX

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