How does smart money manage their way in the forex market? Here are some strategies that will show you how.
Smart Money strategy is the institutional trading strategy that is in line with the perspectives of Smart Money. It is a very effective strategy for trading with better accuracy and precision with access to reliable knowledge and resources.
The Smart Money strategy is quite better than retail trading which is more common but produces less effective results, as it is about taking advantage of market movements and positions in a way that will allow you to maximize profit. This will give you a true narrative and an almost precise prediction of price movement in the markets.
This strategy involves central banks, institutional investors, and market makers who together wield a powerful influence on financial markets. Therefore, the Smart Money strategy allows you to align youroperations with the power and influence of big playersto increase your chances in making consistent profits.
As you probably know, big players have immense size positions which can bring significant movements in the market. They also have a deep understanding of market psychology on top of it. These big players are not here to lose but to win as they have maximized their resources to ensure continuous success. If you want to have well-ordered success in the forex market, you need to adopt a similar mindset.
Well, actually, that does not mean you will never lose when using this strategy, but it certainly keeps you focused and set you up for regular winning trades. Once you adopt trading strategies that are in line with those of the big players, then your chances of profitability will increase.
There are two major strategies around Smart Money: analysis of the order book and taking advantage of traps.
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Analysis of the Order Book
Analysis of the order book is a Smart Money strategy that allows traders to have a clear view of market position. In it, you can study and examine the market sentiment of the forex currency pairs of your choice directly from the MT4 trading platform.
This strategy is based on the idea of market execution that is the opposite of general retail trading practice. Hence, you can take advantage of the predictable order placement from such trading actions. With this, you are able to identify existing and non-existing inordinate clusters among sellers and buyers.
The order book is designed in such a way that the left side shows all the pending orders like stop loss and take profit orders, while the right side reveals current open trades. By utilizing the order book indicator to identify what the other retail traders are doing, you can make excellent decisions and successfully trade against them for better profit margins. The order book indicator allows you to:
- Pinpoint important market levels that are likely to be targeted by institutions.
- Determine the likely point of the next move in the market.
- Identify the largest clusters of stop loss.
Taking Advantage of Traps
Taking advantage of traps involves using an indicator known as stop loss clusters indicator to examine areas where stop orders have converged. Usually, they tend to converge around key swing highs/lows or psychological round numbers. It is important to note that cluster simply indicates that there is a substantial number of stop loss orders just waiting to be completed.
Armed with this knowledge, you can easily pinpoint areas on your chart that are likely to be targeted by Smart Money, since to the big players, stop-loss orders signify liquidity.
Liquidity is needed to complete a bigger position without having to incur a significant price slippage as they enter such a position. These areas of clusters enable you to avoid positioning your stops in areas that already contain clusters. Thus, you are able to effectively use Smart Money in the market and take advantage of liquidity clusters for your gain.
Knowing an upstanding trading strategy like Smart Money is a good weapon to have against the odds of the forex market. Nonetheless, you have to always be able to adapt to the different challenges that the market offers.
This is why you shouldn't be sad just because of a few losing trades. You need to understand that becoming a successful forex trader with regular winning trades is not easy. You must be ready to put effort while also learning how the market and its various parts work. You also need to be smarter when placing your positions. That way, you'll be no longer be the prey in the bigger scheme.
Oktavina Justine
With over 3 years of experience in forex trading and finance as a whole, I cover all topics including reviews on forex brokers, expert advisors, MT4, MT5, and just about anything in regard to forex industry.
