WHAT IS SMART MONEY TECHNIQUE DIVERGENCE?

✴️ WHAT DOES SMART MONEY DOING: ACCUMULATING OR DISTRIBUTING?

SMT (Smart Money Technique) Divergence is the divergence of prices of correlated assets or the relationship to inversely correlated assets.

Analyzing the SMT Divergence allows you to determine the institutional structure of the market to determine what the smart money is doing accumulating or distributing.

Currency pairs are easy to analyze using the DXY US Dollar Index. Every price fluctuation must be confirmed by market symmetry. The occurrence of price asymmetry signals the formation of an SMT Divergence and a likely trend reversal.

SMT DIVERGENCE IN ACCUMULATION

SMT DIVERGENCE IN DISTRIBUTION

✴️ WHICH PAIR TO CHOOSE FOR TRADING?
As traders, we need activity in the markets, volatility is what makes trading easier.

The news background is the driver that drives this, which is why the trading day starts with a look at the economic calendar.

If GBP news is scheduled to be released, it does not mean that, for example, GBPUSD will be preferred over EURUSD.

The logic is that closely correlated pairs are likely to move symmetrically. But when SMT divergences are formed, one of the pairs will show strength or weakness, which signals the approaching high volatility on such a pair. GBPUSD updated the high, while EURUSD failed (showed weakness) which results in opening short positions on EURUSD.

As a result, despite the important news on the GBP, EURUSD showed a higher amplitude of movement (volatility).

In the following example, EURUSD updated the high, while GBPUSD failed (showed weakness) that as a result we open short positions on GBPUSD.