How to Trade Smart Money Concepts SMC with Top-Down Analysis (FOREX)

Today, I will show you how to trade SMC with Top-Down Analysis.

You will learn how to combine liquidity, structure mapping, mitigation and breaker blocks on different time frames for spotting accurate entries.

Learn advanced Smart Money Concepts strategy for trading Forex.

Time Frames & Order

In this strategy, we will use 2 time frames: daily time frame and 4H.

Always start your analysis with a daily time frame.

You will need to identify liquidity supply and demand zones there.

To understand how to use this strategy step by step, let's study 2 price models.

Model to Sell

After you see a test of a supply zone on a daily time frame, start analyzing a 4H time frame.

On a 4H, you will need to do structure mapping and make sure that the market is in an intraday bullish trend.

In this bullish trend, you will need to identify Order Block zone.

It will a liquidity demand zone based on the last Higher Low.

Your signal to sell will be its breakout and a 4H candle close below.

Depending on a price action, set your sell limit order on the broken order block zone (it will be either a breaker or mitigation block).

• Your stop loss should be above the last Higher High,

• Your take profit should be the next demand zone on a 4H.

Example

Here is the example of such a price model on EURUSD.

The price reached a significant daily supply zone.

After its test, the price dropped, breaking a bullish order block zone.

Selling on its retest (entry was the lowest candle close within a broken OB zone), stop loss was above the highs and tp - the closest 4H demand zone.

Model to Buy

Now, let's study the second price model.

If you see a test of a demand zone on a daily time frame, start analyzing a 4H time frame.

On a 4H, you will need to do structure mapping and make sure that the market is in an intraday bearish trend.

In this downtrend, you will need to identify Order Block zone.

It will a liquidity supply zone based on the last Lower High.

Your signal to buy will be its breakout and a 4H candle close above.

Depending on a price action, set your buy limit order on the broken order block zone (it will be either a breaker or mitigation block).

• Your stop loss should be below the last Lower Low,

• Your take profit should be the next supply zone on a 4H.

Example

Examine the following setup on EURNZD.

We see a test of a significant daily demand cluster.

The pair is bearish on a 4H time frame.

Our signal to buy will be a bullish breakout of an Order Block zone and a 4H candle close above that.

We will set a buy limit on its retest then (entry level will be the highest candle 4H close with OB zone).

TP will be the next 4H supply zone and SL will lie below LL.

2 Great Models

2 simple price models that we studied in this video will help you to effectively trade liquidity supply and demand zones.

A combination of 2 time frames, basic structure mapping and change of character will provide an accurate entry signal for your trades.