Smart Money Concepts (SMC)

4 авг.

Introductions:

Before explaining the functions of this indicator to you, we need to talk about what theoretical knowledge we need to have. Many different price approaches have been developed over the decades with different analysis methods and are still evolving. Some theories used in classical trend analysis methods are interpreted or blended with different perspectives over time and we try to make more successful analyses by having a consistent market reading strategy. While analyzing the classical market structure with the price action method, some issues that are missing and do not fit into place are brought to light with a higher level analysis method known as the smart money concept.

As a result of the research and developments we have done on this subject from many different sources for a long time, I personally think that the most efficient and logical concept is the smart money concept. Of course, no matter which method we use, acting within a risk management and remaining strictly loyal to our conditions should be our first priority so that we can talk about sustainable success in the market. In light of all this, we decided to make an indicator of this concept, which we believe is consistent.

In order to analyze the market structure correctly, we must first draw fractal structures and interpret them correctly. Because the market consists of fractal structures. Regardless of the technique, if we cannot draw fractals correctly or if we make an incorrect interpretation while determining them, our market structure analysis may also be incorrect.

Instead of manually identifying fractal structures, script writers often choose the following method for ease of use; They leave the number of candles to the user's choice, detect the highest and lowest points among x number of candles, and draw fractal structures accordingly, but in fact this is not an accurate detection method. In the visual I have prepared below, you can see how the correct fractal structures should be drawn. Fractal structures should be made based on the previous and next candle levels, not from a certain group of candles.



To identify market structures, we make an interpretation based on these fractal movements.

While classic market structure analysis with traditional price action follows a relatively simpler path as shown in the example below, this situation is a bit more detailed in the smart money concepts.



To explain the situation in the smart money concept in an easily understandable way, it is as follows; imagine an uptrend that progresses by creating levels HH and HL, when the price creates a new HL, we call this point as inducement and we move this level up as each new HL is formed. When drawing structures in this way, when the price falls below the inducement level, the peak is confirmed. To explain it with a different approach, the price must first get liquidity from these last rising bottoms in order to make a break of structure (BOS). The break of structure occurs when the price passes the approved peak. When BOS occurs, the lowest point between this point and the previous peak is defined as the Swing Low and this is the level that needs to be protected in uptrend. When BOS occurs, the last HL point that made this BOS is also defined as inducement and it continues to move as new HL is formed until the new peak is confirmed. If the price somehow "closes" below the Swing Low point that needs to be protected, CHOCH (change of character) has occurred and the trend direction has changed. After CHOCH, we start applying the same logic for the downtrend, the last LH peak formed after is defined as inducement and as the fractal structure continues downward, this level is also carried as the inducement level until the Swing Low level is determined. An important note is; In order for BOS and CHOCH to be valid, "a closing must definitely occur". If it remains in the form of a wick, we call it a liquidity sweep and the end point of this wick is updated as the point where we need to look for a closing in order to be able to say that the BOS or CHOCH level is determined. By the way, We call these liquidity sweep points as "x" in the indicator.
It may be easier to explain this topic with a few sample images that I have shared below.









The thing to consider in the smart money concept is that if you are going to take a long trade in an uptrend, you should wait for the price to fall below the inducement level or if you are going to take a short trade in a downtrend, you should wait for the price to rise above the inducement level and only then look for suitable structures, order flows, order blocks, price gaps and other structures before this are considered traps in this concept. I have some strategies that I personally apply, but since these are my personal preferences, I do not find it right to share them here in order not to affect your opinions, but I am basically careful to act as I stated above.

While preparing this script, we paid attention to the fact that it can be interpreted with a real human eye, provides ease at the speed of machine language and can work extremely flawlessly.
From the first moment we started preparing the script, we went through a long and seriously laborious preparation process that lasted months until now, which we happily share.
We brought this code to life by putting on the table almost everything the user may want in terms of both flawlessly fulfilling the conditions specified by the concept and convenience.

If we touch on the function of the code in order, our code finds the following;

It perfectly identifies the fractals that form the basis of the market structure, within the framework of the rules that I mentioned above, we taught to the script.



According to smart money concepts, as I explained in detail above, it provides great convenience in this regard by skillfully identifying the direction of the market in the time period you are in, rather than traditional methods.



In addition to identifying the direction of the market, it also detects the direction changes taking place in the internal structure. Indicator tries to detect even the slightest direction changes by making a stricter interpretation while determining the trend and bottom-top points in the internal structure. Theoretically, it determines the top point in a downward fractal breakout, and marks the bottom point in an upward fractal breakout.





In this context, it also uniquely identifies the candle flow direction and we can observe it on the table. I explained this issue in the first image about fractal determination, you can read that part again.

When you identify swing structures correctly, you will also determine the area you need to focus on, and we have also included this in the script.



Another one of our favorite features on the chart is that it can show active swing areas live by following the BOS, CHOCH and Inducement lines. So, I believe that this gives it a more professional appearance.



In the light of all these functions, it provides great ease of use while presenting data on the direction of the market in a table not only in the current time frame but also in 6 different time frames that the user can choose according to his/her preference, including seconds timeframes (1 sec., 5 sec., 15 sec., 30 sec. etc.)



In order to speed up the user, it instantly informs the selected parity and all structural changes (Bos, Choch, Inducement, Liquidity Sweeps etc.) that occur on the market structure of this timeframe by setting a single alarm.




In the settings window, you will find the following settings that we have personalized for you:

Main Options;

Fractal Lines box: You can check this box to see whether the fractals that form the basic interpretation structure of the indicator are visible or not.
Swing Lines box: You can use this box to turn on or off the Bos, Choch, Inducement and Liquidity Sweeps lines, which are the main elements of the market structure.
Internal Structures box: You can check this box to observe the H and L points in the internal structure of the graph and therefore the direction in the internal structure.
Live Bos / Choch / Inducement Lines box: You can turn on / off the visibility of the lines belonging to the current and active Bos, Choch and Inducement levels on the chart.
Range Lines box: You can use it to turn on / off the visibility of range lines drawn between the active Swing high and Swing low points on the chart.
Multitimeframe Tables box: It allows you to open and close the table where you can observe the main trend direction of the current parity on the screen, its internal structure and the candle flow direction in 6 different time frames.



Fractal Settings;
In this section, you can choose the colors, style and thickness of the fractal lines as you wish.



Swing Settings;
In this section you can choose the colors of the Swing High and Swing Low points, their shape and size.
Likewise, you can choose the colors, line style, thickness and text size of Bos and Choch lines for bullish and bearish situations.
There are also settings where you can choose the colors, style, line thickness and text size of the Liquidity Sweep and Inducement lines.



Internal Swing Settings;
In this section, you can determine the colors of the High and Low points detected in the internal structure and select the label size, style and thickness of the direction change lines.



Live BOS / CHOCH / IDM Lines;
In this section, you can select the colors, label sizes, line style and thickness of the bos, choch and inducement lines that show the important levels followed in the current status of the chart.



Range Settings;
As mentioned above, you can choose the color, style, thickness of the range lines drawn between the active swing high and swing low points and the size of the price tags of these levels.



Multitimeframe Table Settings;
In this section, there are settings boxes for 6 selectable timeframes, 9 different position alternatives where you can change the position of the table, and a section where you can find 2 different options to express the directions in the table. In addition to these, you will also be able to choose the background color of the table and the color of the text used to express the directions in the table.



We hope that this script will reach a wide audience by becoming a tool that will be used with pleasure and indispensable, while providing convenience to all users, as we have dreamed of and expected from the first moment we started writing it.

DISCLAIMER: No sharing, copying, reselling, modifying, or any other forms of use are authorized for the documents, script / strategy, and the information published with them. This informational planning script / strategy is strictly for individual use and educational purposes only. This is not financial or investment advice. Investments are always made at your own risk and are based on your personal judgement. We are not responsible for any losses you may incur. Please invest wisely.

Best regards and enjoy it.