How To Use SMT Divergence - TTrades Fractal Model

How's it going everyone? This is going to be a video over SMT within the Fractal model.

Now it is important to note that SMT is not used to force yourself upon a model, but it is used as a confluence within the model.

So I'm not going to randomly use SMT and then try to find a model within that, but I'm going to first find a model and then see if it has SMT for extra confluence.

Let's get into the PDF. So what is SMT? SMT is a divergence between correlated markets.

So for instance, if I have the S&P 500 here or ES and NASDAQ here, those are correlated markets.

They should be moving in the same direction. However, if they have a difference in structure, so for instance here, the S&P makes

a higher high while the NASDAQ makes a lower low, that would be a divergence between correlated markets, also known as an SMT.

And that is what we can use to give confluence to a reversal. So that is what an SMT is.

How do we use it within the fractal model? Within the fractal model, and this is what it looks like on a lower timeframe, I'm going to be looking for a model.

So a candle two or a candle three closure paired with a change in the state of delivery on a lower time frame and then referencing that correlated market to see if it has an SMT.

So here you can see we have a candle to closure. We have a lower time frame change in the state of delivery.

Only once I have a model that has formed do I look at the correlated market.

Here you can see I can look at the correlated market and it has formed a lower high while we have formed a higher high.

So I can go ahead and mark out that SMT on the lower time frame or as well on the higher time frame and that can give me a confluence to this reversal forming.

And that will be an SMT between candle one and candle two.

Now we can also have an SMT between candle two and candle three, which is a continuation SMT.

So this is a reversal SMT forming the reversal.

This is a continuation SMT as it's within the continuation.

So here you can see once again, we have a candle two closure,

a change in the state of delivery on the lower timeframe, a valid model before we are looking for SMT.

Then we go ahead and take a look. We don't have SMT between candle one and candle two, but we can still keep watching the correlated market.

Here when we go to form this continuation, what do we do?

We don't take out the high, but on a correlated market, we do take out the high.

So that is an SMT between candle two and candle three for a continuation.

That can give us a confluence to trade this continuation lower and trust that this candle two can hold.

Now we can also get a double SMT or an SMT between candle one and two and between two and three.

So we have this reversal SMT, but we also have this continuation SMT.

Now once again, it's important that you don't just randomly look for SMTs.

You need to have an actual model that is the foundation, and then you look for an SMT as a confluence.

So let's get into TradingView and go over a few examples.

So here we are in our first example, and you can see we have a candle to closure with a change in the state of delivery.

And then we have a reversal SMT or an SMT with YM.

This is on MQ from candle two to candle one.

That gives us an extra confirmation that this can reverse here and we can get an expansion lower in candle three.

Now, why am I not looking at this candle two in a bullish scenario?

Well, because if we follow the low, find the high, we have not closed through the series of downclosed candles.

So it is only valid to look short in this scenario. So let's see what happens here.

You can see we do get that sell off to our targets and then we get a continuation in candle four.

Let's continue ahead and see if we can find another example.

So here we have a candle two closure bullish, but let's see if it works out. There is no SMT between candle 1 and candle 2.

Does SMT form between candle 2 and candle 3? Well, as we let this play ahead, it does not.

It invalidates the T-spot and then takes out the low.

Now here we have an SMT, and you can see ES and YM have not taken out this low, while NQ has.

But like I said, I don't want to randomly use SMT without context, so I'm going to wait for the candle closure.

and here you can see we make a new low and then it will update

the smt it is in replay so it will be a bit delayed but

we have a change in the state of delivery with smt once

again let's wait for the closure so here we have a closure

now right so a candle to closure with a change in the state delivery and now this smt with ym or this reversal is valid to look for long setups let's see what happens.