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SMART MONEY CONCEPTS STRATEGY - The Prop Trader

The document discusses strategies for trading foreign exchange based on analyzing market sessions and 'kill zones'. It outlines how to identify opportunities by focusing on the London and New York trading sessions, and provides templates for identifying buy and sell setups within these sessions.

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0% found this document useful (0 votes)
557 views20 pages

SMART MONEY CONCEPTS STRATEGY - The Prop Trader

The document discusses strategies for trading foreign exchange based on analyzing market sessions and 'kill zones'. It outlines how to identify opportunities by focusing on the London and New York trading sessions, and provides templates for identifying buy and sell setups within these sessions.

Uploaded by

youssner327
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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6/7/23, 12:07 AM SMART MONEY CONCEPTS STRATEGY | The Prop Trader

The Prop Trader <


https://theproptrader.co/>
ICT Concepts

Oct 04 2021 <


https://theproptrader.co/2021/10/04/smart-money/>

Protected: SMART
MONEY CONCEPTS
STRATEGY
FX TRADING SESSIONS AND KILL ZONES
Essentially the FX trading day can be broken into 6 Sessions:
CBDR – 1500 – 1900 ET (No Trading)
Asia Range – 20:00 – 00:00 ET (No Trading)
LD Open Kill Zone – 02:00 – 05:00 ET
NY Open Kill Zone – 07:00 – 10:00 ET
LD Close Kill Zone – 10:00 – 12:00 ET (includes LD Fix 11:00 ET)
PM Session – 1200 – 1500 ET (No Trading)
Kill Zones allow us to narrow our focus to these windows of opportunity.
Time of day is more important than price.
Only trading during the London and New York Kill Zones will greatly
improve your strike rate. Swing Highs and Lows are formed within these
areas most of the time. The US Data Embargo is lifted at 0830 ET right
inside the NY Kill Zone, this can act as a catalyst for trade set ups.
Asia is usually Consolidation or Accumulation
London can see a Judas Swing to form the HOD/LOD

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New York is either a Retracement or Continuation of London to DOL


& HOD/LOD
London Close is Pro t Taking hour, usually a retracement on NY

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Knowing the probabilities before trading a particular pair can greatly
improve your risk reward.
Depending on the FX pair one of these sessions is more likely to set the
low of the day (LOD) or the high of the day (HOD). For example EURUSD
has a 50% chance of setting the LOD or HOD during the NY Kill Zone,
allowing a stop to be placed more con dently.

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The probability for the LOD or HOD being set in Asia or LD drops to 25%. If
LD takes out the Asian Kill Zone High or Low, there is a high probability LD
will set the LOD or HOD.
Here are some stats for EURUSD:
Asia KZ (20:00 -00:00 ET) – 25% D-HIGH/D-LOW
LD KZ (02:00 – 05:00 ET) – 25% D-HIGH/D-LOW
NY KZ (07:00 – 10:00 ET) – 50% D-HIGH/D-LOW
LD FIX (11:00 ET)
SQN (NEUTRAL) – 60%
W-HIGH – 50% MON/FRI
W-LOW – 60% MON/FRI
CME/INDEX TRADING SESSIONS AND KILL ZONES
AM Session – 0830 – 1200 ET
Lunch – 1200-1300 ET (No Trading)
PM Session – 1330-1600 ET
Overnight – 1600 – 0830 ET (No Trading)
TRADINGVIEW CUSTOM SMC INDICATORS
A chart including all indicators required to trade SMC on an intraday basis:
TRUE DAILY OPEN (TDO) TIME & PRICE
DATA EMBARGO TIME & PRICE
OPTIMAL TRADE ENTRY (OTE) WINDOW
ASIA RANGE
MONDAY RANGE
LONDON/NEW YORK/CLOSE KILLZONE
HTF/LTF FVG/IMBALANCE

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WEEK/MONTH/YEAR OPEN PRICE


240/PD/PW/PM/PY HIGH/LOW/EQ
NEW YORK LUNCH
LONDON FIX
DAY OF WEEK
4H CANDLE COUNTDOWN
ROUND & HALF INSTITUTIONAL LEVELS
AVERAGE DAILY RANGE

Example of a SMC Chart

INTRADAY TEMPLATES
The ICT Intraday Market Makers template work everyday in every asset
class and won’t stop. It can help you get a better understanding of price on
an intraday basis and the game plan of the Market Makers.
The market is a playing ground for the Market Makers and following the
footprints can help you to make the right decisions in your trading.
The templates work both for buys and sells.
The templates alone don’t work if you haven’t framed your setups based
on the higher time frames. You should treat the hourly chart just like the
daily chart.
THE BUY TEMPLATE
It unfolds mostly on Monday, Tuesday and latest on Wednesday
It is the best template to make easy money
It happens during the London session. New York session will
eventually give a retracement to continue with the trend that was
set during the London session

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The daily range will last for 7 to 8 hours once the pro le is
established

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Mostly, it will give a drop of about 15 to 30 pips from the daily
opening price during the London session. This is the best time to
take your buy positions
When this pro le is established, the Low of the Day will happen
during London session
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Ideally, it can also move a bit higher a little bit from the opening price
but the idea is that it must drop
LONDON SWING TO Z DAY
Happens in the middle of a larger price swing when the trend is
exhausted after a large explosive move
Ideally it occurs on a Thursday
Price will initially drop below the opening price then run above the
opening price and goes back to the range back consolidation
Will rst unfold as the Buy template
If it continues consolidating, DON’T look for continuation in New
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York
Always take pro ts in the beginning of New York if this pro le
unfolds
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LONDON SWING TO NYO/LDC REVERSAL
It always begins like a classic Buy template with a decline of about
15 to 30 pips below the NY Midnight opening price then rallies
Once it drops, it forms a buy entry then rallies in to a higher time
frame Point of Interest like a bearish OB, to close in to a FVG, OTE,
etc.
If it happens during New York session, it indicates classic market
reversal pro le
The template is used by the Market Makers to either reach for a
fi
Higher Time Frame bearish Order Block (OB), turtle soup or even to
close a range
It will rst create initial low of the day during London session, run up
and create high of the day during New York or London Close, then
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run down, clearing the initial low that was created during the London
session
Ideally can pan out after the market is in an exhaustion based on the
HTF dominant trend

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RANGE TO NYO/LDC RALLY


Generally, it happens during NFP or FOMC news events
The market will be originally in consolidation
Can occur during interest rates announcements as it relates to
FOMC
If it occurs, the lows will be run out initially and will explode to the
upside either during NFP or FOMC.
Also, any high impact news during the New York session or London
Close can pan out this way
CONSOLIDATION RAID ON DATA EMBARGO LIFTING
Happens during the major news events in New York
Best unfolds during FOMC
During news, the low of the consolidation will be taken out. Good to
buy when the low of the consolidation has been taken out.
LONDON SWING TO SEEK & DESTROY
This is the type of pro le that won’t make you money
Initially, it will give you London Open buy, but won’t come in to
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fruition
Can occur at the end of a larger price move
Can occur in the middle of a large price swing
Its main intention is to take out both buyers and sellers
DIVERGENCE (SMT)
Correlation between the Major FX pairs can be used to determine if a
reversal is likely or not. EURUSD, GBPUSD and DXY are highly correlated
and will be used for this example.
As you can see in this example EURUSD (top) made a new high taking out
the previous days high during the LD Opening Range, whereas GBPUSD
(middle) and DXY (bottom) did not.
This was a liquidity grab above the EQHs before the price reversed.

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The Interest Rate markets control everything around the world. If the bond
markets are dropping lower…this means interest rates are going higher,
which in turn drives the USD higher.
Interest Rate Markets: ZB (US30Y T-Bond), ZN (US10Y T-Notes), ZF
(US05Y Note), ZT (US02Y Note).
All of the above are inversely related to the US Dollar Index (USDX/DXY).
Check for SMT.D between the interest rate markets at moments when the
USDX is at a significant price level.
Failure Swings highlight Smart Money participation in the markets and
trading opportunities are validated.
FLIP ZONE (FZ)
This is when Resistant becomes Support & vice versa.
SIGNIFICANT SUPPORT & RESISTANCE (SSR)
SSR is a Flip zone tested many times. This is where the Market Maker
comes back to mitigate their loses.
Since SSR is a STRONG ZONE where Retail Traders place their orders
(Stops Orders), the MM will want to activate/manipulate their orders
before resuming the initial direction.

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6/7/23, 12:07 AM SMART MONEY CONCEPTS STRATEGY | The Prop Trader

ORDER BLOCKS (OB)


Order blocks constitute supply and demand areas in a visual way. They
offer precise entries and easy invalidation levels. A high probability order
block is an aggressive move that gets reversed.
An Order block can be described as an institutional candle usually seated
on a support or resistance level and used by market makers to mitigate
orders. Please take note that not all candles seated on S/R levels are OBs.
Order Blocks are internal liquidity – when price “pumps/dumps”. All the
buying/selling will be done in a down/up closed candle and the RTO causes
price to expand in the opposite direction when the liquidity within that
candle is absorbed.
Order blocks are strongest when they make FVGs. When reversing at an
order block need the same + inducement for high probability.
OB is a Down/Up Candle before the move Up/Down
Down Candle is a Bearish Candle
Up Candle is a Bullish Candle
Bullish Order Block [BuOB] is Down candle before the move up
Bearish Order Block [BeOB] is Up Candle before the move down
Not every OB quali es to be tradable. Therefore, we want to consider
some aspects regarding our Entry Types before engaging the market.
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Tradable OBs generally have higher probability where we expect price to
respect the block.
It’s essential to understand that an OB at any given timeframe is only
tradable if it complies with the multiple timeframe analysis within your
timeframe matrix together with the following rules:
1. OB should be at Support or Resistance
2. OB should be at the Flip Zone
3. OB must Break the Market Structure – BMS
4. FVG after creation of OB must be 2 times the OB & RR must be 3
times the OB
5. OB must take out an opposing OB
6. Bearish OB must be above SSR and Bullish OB must be below the
SSL
7. Bullish OB below EQL
8. Bearish OB above EQH

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6/7/23, 12:07 AM SMART MONEY CONCEPTS STRATEGY | The Prop Trader

Regarding the above 8 features of Tradable OBs, which one would you
consider as your top 2
con rmation? Well, it’s upon you to back test and choose the trading
method that suits you.
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When trading this method, be sure to stick to your Time Frame Matrix
depending on the type of trader you are:

HTF LTF ENTRY TF


MN WK D
WK D H4
D H4 H1
H4 H1 M15
H1 M15 M5

For instance, take H4 – H1 – M15.


If price is respecting H4 BuOB, mark the opposing valid H4 BeOB (This will
be your range).
Now you are going to trade within this range. Look for bullish alignment on
H1 TF with entry con rmation on M15 BuOB.
This method is valid if and only if the price has not reached opposing
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BeOB.
Choose your TF i.e., H4 – H1 – M15
Choose your Con rmation i.e., LV + BMS + 3RR
Wait for your Set up to form
fi
Continuing with the EURSD trade. After the liquidity grab above Friday’s
Highs and the EQHs from Thursday a reversal did occur.
A bullish order block is the last down candle before an impulsive
move up that leads to a BOS.
A bearish order block is the last up candle before an impulsive move
down.
An Order Block (OB) is the last bull candle (02:00 EST) in a run higher
before a reversal. After the bear candle (03:00 EST) closes, a Sell Limit
Order can be placed at the lower end of the OB to trigger a retracement
back into the OB to catch the move lower.

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A Bullish Breaker (BB) is the last down close candle(s) in a swing low prior
to a higher high. It becomes valid once stops are taken above a previous
high and breaks below the swing low that contains the breaker candle.
Bulls are trapped here and institutions are mitigating longs.

IMBALANCE / FAIR VALUE GAP (FVG)


You should view FVGs as an area of liquidity. Price delivers to these areas
to pick up liquidity (internal range) and distributes this liquidity to willing
buyers / sellers above / below old HTF highs / lows (external range). They
occur because there is insufficient trading in the market, sometimes
called Liquidity Void. When there is insufficient trading in the market, the
price often comes back to fill out the orders that were left.
A FVG / Imbalance is created by 2-3 or more Extended Range Candles
[ERC]
ERC candle often closes at 80% of the candle range
When the Market Maker want to move price up at a certain level, it is
assumed that there should be enough sell orders to pair their buy orders
with (this is how they make profit).
So, when the MM moves away from a given level with strength and
magnitude, leaving behind a LV / FVG / IMB, we can assume that the sell
orders that were available at that level were not enough to pair with their
Buy Orders.
Therefore, the MM will often come back to this level for mitigation.
A high probability Bullish FVG will have SSL resting above it. A high
probability Bearish FVG will BSL resting below it.

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6/7/23, 12:07 AM SMART MONEY CONCEPTS STRATEGY | The Prop Trader

MITIGATION
Mitigation means; to reduce risk.
When the MM moves price away from a level with strength and
magnitude, say they are buying; it is assumed that they are enticing retail
traders to join the move.
And because most retail traders chase price, they join the ride with their
SL set not too far away.
This is the reason that the MM will come back to clear retail traders SL.
When their SL are hit, they are knocked out of the move, hence MM
mitigating their risk
To know that the MM are mitigating, there are a number of things you
need to consider.
For instance, the LV must accomplish some tasks before validating the OB.
To validate a BuOB with a Bullish LV:
LV should take out opposing OB or
LV should Break Out Market Structure or
LV should Create Equal High EQL. This is valid if the price is
bouncing from HTF BuOB (For Reversal Entry) or a trading market
(for re-entries)
HTF OBs are more effective than LTF OBs, especially when these
conditions are met.

The short trade should be covered on reaching the FVG at approx. 1.1325.

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This is an imbalance left over from the move higher in the Asia Session
(19:45 EST), where price moved quickly from 1.1320 to 1.1330 without a
pullback to allow buyers the opportunity to execute their orders.
If a previous YEARLY HIGH / LOW is raided, price action will pullback and
fill the nearest WEEKLY FVG. The same applies to the lower timeframes:
MONTHLY HIGH / LOW = DAILY FVG
WEEKLY HIGH / LOW = H4 FVG
DAILY HIGH / LOW = H1 FVG
H4 HIGH / LOW = M5 FVG
H1 HIGH / LOW = M1 FVG
The OHLC of the previous HTF candle will give you all the context you
need for a bias. Wait for the previous HTF candle HIGH or LOW to get
raided, then pick your LTF to execute on & create a blueprint for entry &
invalidation.
NEW MONTHLY CANDLE
Locate previous relevant Weekly Highs & Lows
Locate previous Daily Highs & Lows
Locate Weekly/Daily FVGs & inef cient price.
This new monthly candle should ll in these levels.
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Use lower TF’s for entries to target these levels.
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LIQUIDITY POOLS
In the simplest way possible, Liquidity is a measure of the ease of ability to
enter and exit a
market at the desired price based on the number of buyers (bids) and
sellers (asks/offers) in
that market.
The primary objectives of the Market Maker in respect to liquidity is:
To make a market in by buying and selling from their own inventory,
when public orders to buy or sell the asset are absent.
To keep the market book of orders, consisting of limited orders to
buy and sell, as well as stop orders placed by the general market
participants.
Generally, if you understand these two points, you will know how the MM
make fake out and

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induce retail traders.


BUY STOP LIQUIDITY (BSL)
The BSL is a pool of Buy Stop orders with their respective Stop Losses.
When BSL is taken out (Buy Stops activated), the market reverses to the
downside (clearing the Stop Loss orders). Where to spot BSL:
Previous Month High – PMH
Previous Week High – PWH
Previous Day High – PDH
High of Day – HOD
Old High/Swing High
Equal Highs – EQH
SELL STOP LIQUIDITY (SSL)
The SSL is a pool of Sell Stop orders with their respective Stop Losses.
When SSL is taken out (Sell Stops activated), the market reverses to the
upside (clearing the
Stop Loss orders). Where to spot SSL:
Previous Month Low – PML
Previous Week Low – PWL
Previous Day Low – PDL
Low of Day – LOD
Old Low/Swing Low
Equal Low – EQL
TRADING LIQUIDITY (LQ)
A Liquidity setup should include the following:
Stop Hunting – SH. This is simply a false breakout above/below the
zone where Liquidity is residing
Break-in Market Structure – BMS/BOS. This is when market
structure is broken (HH or LL for a continuous trend) or (HL or LH for
direction change/ChoCh)
Factors to Consider when Trading Liquidity:
The Trend: Trend is your friend, so always trade in line with HTF
trend direction
Supply & Demand: Consider market imbalance and accomplishment

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Support & Resistance – EQL & EQH: Always wait for fake-out at the
SnR zones
Compression: This is the best way to know if price is retracing
Daily, Weekly and Monthly Lows and Highs are sources of liquidity that are
commonly hunted before reversals can occur.

EQH Liquidity Grab

EQUAL HIGHS (EQH) & EQUAL LOWS (EQL)


If a number of candles on a particular timeframe create Trading Range
(TR) between EQHs and EQLs, expect the level to be eventually tested as
this is where retail traders place their stops.
Once these liquidity pools have been tapped the price is likely to reverse.
If these levels coincide with a LD FIX level, Order Block level or
Daily/Weekly Lows/Highs then the probability of a reversal is increased.

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EQHs, Daily & Weekly levels tested, reversal likely

HIGH-BASES (HB) & LOW-BASES (LB)


HBs and LBs are formed on all timeframes and are a good indication price
will continue trending in the same direction. TP of a breakout of a HB/LB
should be taken at 1.2R.

High-Base

INTERBANK PRICE DELIVERY ALGO (IPDA)


IPDA moves price to engineer liquidity above/below the market. Liquidity
will reside in the form of buy/sell stops. Interbank traders will seek to pair
this liquidity with opposing positions, and offset these orders to opposing
liquidity pools.
Wait for Liquidity to be taken out – BSL

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Rebalance Inef cient Price Action


Look for displacement & FVG

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Target Opposing Liquidity – SSL
Accumulation – Manipulation – Distribution – AMD
Pairing of Orders
IPDA Data Ranges are 20-40-60 Trading Days.
IPDA moves price from External Range Liquidity (Swing High/Low) to
Internal Range Liquidity (FVG) back to External Range Liquidity (Swing
High/Low).

PREMIUM – DISCOUNT (PD)


A Dealing Range is created when a Swing Low (SSL) is taken out followed
by a Swing High (BSL) being taken out.
The Dealing Range can now be split 50:50. If Bullish, price must enter into
Lower 50% of the DR before looking for longs. If Bearish, price must enter
into the Upper 50% before looking for shorts.
OPTIMAL TRADE ENTRY
Price Expansion followed by Retracement to the OTE Window of
62%-79% of Expansive move.
Look for Order Block, FVG, Breaker or Mitigation in Expansive move
opposite the OTE Window area. Requires HTF Support/Resistance

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below/above Expansive move. Also requires a Break in Market Structure


(BMS) to be valid.
Target Price Expansion High/Low.
POWER OF 3 (PO3)
ICT Concept that breaks down the range of a candle.
Always Buy below the True Daily Open at 0000 ET (TDO) in a Bullish
market, and Sell above the TDO in a Bearish market. Must be a Draw on
Liquidity (DOL) above/below entry.

ACCUMULATION, MANIPULATION & DISTRIBUTION (AMD)


Consolidation is Accumulation – Buy Stops and Sell Stops are placed
above and below a trading range, this engineers Liquidity.
Expansion is Manipulation – Stops are triggered. Smart Money pairs the
resting Stop Orders and the Expansion occurs.
Reversal is Distribution – The opposing Stops are targeted to offset the
orders.
The Accumulation phase must occur just below/above a HTF DOL. The
Expansion phase must retrace into Internal Liquidity (FVG, OB, BB, MB).
The Distribution phase then targets the opposing Liquidity & HTF DOL.

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3 BAR SWING
3-Bar Swing High = Left Candle Lower High (LH), Middle Candle Higher
High (HH), Right Candle Lower High (LH) & Close Below Middle Candle Low
(L)
3-Bar Swing Low = Left Candle Higher Low (HL), Middle Candle Lower Low
(LL), Right Candle Higher Low (HL) & Close Above Middle Candle High (H)
We also need Support/Resistance and Break in Market Structure (BMS).
High Probability BMS consists of the following:
Accumulation below HTF Resistance/above Support
Manipulation & 3-Bar Swing High/Low
Distribution – Pairing of Stops into Resistance/Support
Smart Money Reversal – SMR
Impulsive Move back thru 3-Bar Swing High/Low
Creating Fair Value Gap FVG
TIME PRICE OPPORTUNITY (TPO)
By using a TPO chart, you are able to analyze the amount of trading
activity, based on time, for each price level the market traded at for any
given time period.
Each letter would be a TPO and the way these are built is, as price trades it
prints a TPO. Each bracket is a half-hour that it represents. As the market
moves up and down there is a distribution of the TPO lines.
One of the key things that traders utilize and bene t from by looking at a
TPO chart, is that it helps you look at how a market is backing and lling,
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trading up and down, and where it tends to revert to. It provides a unique
fi
view of the market, whereas a candlestick chart looks at them horizontally
over time as 30-minute bars. But if you were to compress these and just
stack them all up, that’s what you end up having on the TPO chart.
A single letter shows where the price is quickly rejected from and can be
pivotal.

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6/7/23, 12:07 AM SMART MONEY CONCEPTS STRATEGY | The Prop Trader

WYCKOFF METHOD
There are many other SMC strategies that can be traded, many are
focused around “Accumulation” and “Distribution” as seen in the Wyckoff
Method:

APPENDIX
https://drive.google.com/drive/folders/1qKENSDC5dnDGfou5oyv-
gEbRyH-3QUHA?usp=sharing <
https://drive.google.com/drive/folders/1qKENSDC5dnDGfou5oyv-
gEbRyH-3QUHA?usp=sharing>

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1 Comment

Anonymous

March 24, 2023 at 17:01 < https://theproptrader.co/2021/10/04/smart-


money/#comment-22>

Sir can you please post about how to identify orderflow and how to
determine daily bias and draw on liquidity please

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