hey guys welcome back to another episode of smart risk in this video we will show you one of our Advanced entry strategies which we have developed using smart money techniques order block and Order block today we will show you step by step how to fully apply this trading setup on any chart with all the mechanical rules that need to be followed this setup Begins by identifying an order block as the key Trading Zone on the higher time frame next we'll confirm reversals by analyzing the lower time frames when the price Taps into that area finally
we'll trade the order blocks that form along the way until we reach our targets ensuring high quality entries if learning smart money Concepts strategies entry reasons and how to stay disciplined with the trading plan interests you make sure to hit the like button to show your support and subscribe to our Channel if you're new [Music] before we start here are two important points about this trading setup everything we discuss in this video can be used for currency trading stock trading and crypto because price action remains fairly consistent across different markets second make sure to fully
understand all of the steps we will explain for this trading setup before starting to back test or trade it on the chart because this trading plan is a systematic method that takes into consideration multiple trading concepts for achieving the highest accuracy now let's get started this trading plan consists of three major time frames first we have the daily time frame where we will do a general analysis we will read the market structure to find key levels and assess how much space we have before reaching an important higher time frame level second we have the 1our
chart where we will apply smart money Concepts to identify Market Direction liquidity levels fair value gaps and more importantly the order blocks which are the optimal trading zones that might provide us with a highquality trading setup in the final step we will zoom into our lower time frame the five minute chart to find confirmation and enter positions remember this trading plan is not limited to any specific chart or time frame however you must use a combination of time frames to analyze Market factors and gain a comprehensive understanding of market conditions step one Higher time frame
analysis in the higher time frame we want to understand where we are in the bigger picture so we avoid trading blindly on the lower time frame charts to keep things simple we focus on marking key levels in the higher time frame and determining how much room we have before reaching the next key level ahead of the current price these key levels have specific characteristics here are some top criteria based on price action the opposite colored candles if you examine the trading chart you'll notice that an opposite colored candle within an impulsive move often acts as
strong support support or resistance institutions and large participants frequently use these candles as the origin to refine their trading plans therefore we always Mark these on the chart especially on higher time frames and anticipate a reaction when the price Taps into these levels fair value gaps if you're a smart money Trader identifying the fair value Gap should be one of the first things you do when you open the trading chart your eyes should immediately jump to it but why is it important to identify fair value gaps these gaps indicate that big players have participated in
the market and moved the price significantly the market often returns to these areas to fill any leftover orders and if there are still orders remaining they will typically reject the price upon retesting multiple rejections multiple rejections from a particular level show that Traders have reacted at the same level multiple times making it stronger while more rejections increase the strength of the level they don't guarantee that it will hold when the market Taps into a level we closely monitor price action to see what's happening if the rejections weaken over time the chances of the price breaking
through that level increase however if the price retests this area again and holds it becomes strong support major levels of Market structure a major level of structure is a Zone where three conditions are met it has been rejected multiple times acted as both support and resistance and has been been recently respected when these conditions align we identify it as a major level of structure capable of producing strong Market reactions the more these criteria are met the higher the probability that the price will reject this level Again by marking key levels on the higher time frames
we can determine how much space we have before reaching the next level now here's an important point the safest way to make profits in the market is by trading in the empty spaces on the higher time frames the reason is that most price manipulations occur around key levels let me explain what I mean imagine this line chart represents our daily time frame this is the most recent key level ahead of the current price so we still have plenty of space before reaching this level on the lower time frames therefore we can enter long positions with
confidence knowing that there are no significant levels acting as barriers for the price speaking purely from a technical analysis perspective of course however the situation is different at Key levels usually we see multiple breaks and fake outs before the market moves in the direction we expect in other words manipulations happen most frequently at key levels to trap Traders looking to trade support and resistance areas afterward the market often enters the distribution phase so quickly that it doesn't provide a pullback or a good entry point in conclusion aim to trade in the empty spaces on higher
time frames for a higher success rate now that we have analyzed the higher time frame it's time to zoom into the 1 hour chart and apply smart money Concepts in this analysis we'll assess the market structure to determine market Direction fair value gaps liquidity areas and most importantly order blocks are optimal trading zones that may provide highquality setups the first thing we want to do is identify the market Direction trading in alignment with the dominant side of the market increases our win rate to identify the market direction we look for break of structures changes in
character and reversal patterns on the chart if you can't clearly determine the market Direction in a specific time frame it's better to move on to the next pair unclear Market Direction in a specific time frame increases the risk of making uninformed trading decisions so shifting to a clearer Trend allows for better decision-making and risk management next we identify liquidity levels on the chart when analyzing we treat traditional support and resistance levels as liquidity areas especially equal highs and lows or multiple rejections which are considered key liquidity zones but why is it important to identify these
liquidity areas on the chart liquidity is a key factor influencing price movements the important thing to understand is that the market tends to move toward levels that contain liquidity conversely the market tends to move away from levels where liquidity has recently been swept with that in mind grabbing liquidity before reaching an OP optimal trading area serves as further confirmation for the price to make the moves we want to see in the market these key areas can also cause significant price rejections so it's essential to secure some profits before the price Taps into them the final
step is to identify fair value gaps and Order blocks which are our key trading zones a fair value Gap refers to the space between the Wicks of three consecutive candles on a price chart additionally we treat the candle that created this Gap as an order block as this is where decisions were made it indicates a buy side imbalance where buying pressure significantly outweighed selling pressure often due to institutional activity when the market enters this phase of inefficiency it typically returns to the fair value Gap area to patch it a conservative approach is to wait for
the price to enter the order block Zone before opening a position an even more cautious method is to zoom into lower time frames look for reversal confirmations and then execute the trade we'll dive into that in now the final step of this trading plan is to look for confirmations and execute the trade on the lower time frame after waiting for the price to enter our Trading Zone we need to see some form of confirmation that indicates the short-term downtrend is over and that the price can move to the upside to identify this reversal we pay
attention to liquidity sweep patterns and changes in character a valid liquidity sweep below below the recent low suggests a possible reversal and if the price breaks above the recent High we have a valid change of character once the reversal is confirmed here's how we execute the trading setup we wait for the price to create an order block this is why the strategy is referred to as order block within an order block however it's important to note that the lower time frame order block does not necessarily have to be inside the higher time frame order block
area after spotting order blocks on the lower time frame we set our buy limit at the start of the order block Zone and place our stop below it for the first Target we make our trade break even by closing half our position when the price reaches our 1 to2 risk to reward Target the next Target will be the first important Zone ahead of the price on the higher time frame before diving into real chart examples I want to explain some common scenarios that occur on the chart and how to handle them in the first scenario
we have a very small order block area when this happens you should consider using using a larger Zone as your stop loss as we want our stop to be protected from Market fluctuations in contrast if we have a large order block Zone on the lower time frame the issue arises that if we set our stop below this Zone we will have a large stop loss in this case we can either take a smaller Zone below the order block area as our stop or set our order in the middle of the Zone this approach will significantly
improve our risk to reward ratio if we end up winning in the the third and most critical scenario we spot multiple order blocks before reaching our Target we will trade all of the order blocks that the market forms along the way if they offer reasonable risk to reward ratios the trades will be executed with reduced risk so do not open trades with more than 2% risk of your capital and never have more than three active trades at the same time remember our focus is on achieving a positive result at the end of the day losing
and missing trades are inevitable after back testing this strategy on the euro dollar pair during the London and New York sessions we have encountered many different scenarios that occur in the market while this is not a real chart example it is based on what usually happens in the market and how we take action here on the 1hour chart we can see that we are in a very smooth uptrend so we are only interested in buying this pair the latest move has created multiple fair value gaps so we Mark the candle before the imbalance as our
optimal trading area the general idea is to wait for the price to tap into this Zone after which we can zoom into the lower time frames to look for confirmations and enter long trades but first let's check the higher time frame to see if our analysis aligns with the bigger picture on the daily time frame we can see that the market has recently broken above an important resistance level indicating that buyers are in control additionally there is still plenty of space before reaching the next significant level ahead of the price therefore our 1-hour analysis aligns
with the daily time frame now back to the 1hour Chart as I mentioned earlier we need to wait for a pullback to enter the order block Zone and then zoom into the lower time frames to look for confirmation of an upward reversal so let's zoom into the 5-minute chart on the 5minute chart the market has already made a change of character which is the reversal signal we were looking for this indicates that the short-term downtrend is over and now we can take long trades with confidence next we simply wait for the price to print order
blocks and open long positions here we have an order block created so we open a long position as the market pushes upward we can see that another order block forms so without canceling the first trade we will open another long position at the second order block this approach is important because the pullback to the first order block is not guaranteed the market can mitigate the second order block and start pushing higher in the worst case scenario the price may drop and lead to two losing trades which is why we must enter with reduced risk now
let's see what happens the price has hit the stop loss of the second trade and triggered the first one once again we spot another order block so without closing the first trade we set a long position at this order block as well this process continues until we reach our Target which is the previous high on the higher time frame this strategy has proven to be profitable but make sure to conduct your own back testing before trading with real money this is the reality of the market no matter how good your trading plan is you will
encounter many losing trades it does not necessarily mean there was something wrong with your analysis the key Point here is to write down your rules and always follow them as long as you stick to your risk management plan you will be fine so guys that's it for this video I hope it provided value to you if it did please go ahead and smash the like button button to show your support and if you're new here consider subscribing to our Channel see you in the next episode
