Video Transcript:
In this video, I’m going to talk about SMT and then the first order block that gets formed after an SMT, and how we can leverage it for our own trading advantage. All right, so for SMT, let’s first take a pair of correlated assets. In this case, on the left side of the screen, you see ES, the S&P E-mini futures, and on the right side, it’s NASDAQ, the NQ (NDX00 futures). The correlation is extremely high. So first, let’s look at the SMT here. You can see ES making a higher low, while NQ is making a lower low. This is a clear case of SMT. Now, what I want you to focus on in this video is the first order block that gets formed. If you look at the price delivery from here, we have a series of down-close candles—consecutive down-close candles. If I draw this here, once the price traded through this area, what we have is a bullish order block. I’m going to denote it with “+OB,” which is a bullish order block. Similarly, if I look at ES, we had an order block that formed from here to here, with this candle closing above it. Here I’m looking at a 4-hour chart. Price is fractal, so you can do the same analysis on smaller timeframes as well. In fact, if I go to a daily chart, you’ll see that the SMT I’m talking about happened on a daily chart. From the daily, I dropped to the 4-hour, and that’s what I want to talk about here. So, here we have this first order block on a 4-hour chart, and on ES, this is the first order block on a 4-hour chart as well—both bullish. The key point here is that any order block that gets formed after this kind of SMT is a high-probability order block, and that should really be the takeaway from this video. This is high probability, and you can look at your charts across any timeframe and journal it for yourself to see how effective these order blocks are. You can see what happened: the price traded through, created this order block, the price traded back in, and then reacted from the order block. You see how this works as a high-probability order block. Similarly, on ES, the price traded through, created the order block, and when the price came within about a tick of the order block, it reacted. This is extremely powerful. If you’re a day trader, you can look at your 15-minute chart, and whenever you see an SMT like this, you can treat that order block as a potential high-probability order block on which you can frame your intraday trades. Let me show you an example that happened recently and provide another case.
This is a 15-minute chart. Let me give you an example of a bearish case. You can see here, from this high to this high, versus this high to this high. While one was making a higher high, the other was making a lower high. This is a clear bearish SMT. Now let’s focus on the order block after this price action. You can see here there was a bearish order block, and here another bearish order block. By definition, these are high-probability bearish order blocks. Since we are on a 15-minute chart, these swings are intraday swings. You can see what happened: once the price traded through, it created a bearish order block. Price touched it a few times and reacted. Similarly, here the price traded through, made an order block, price touched it, and again reacted. I won’t go into the details about what the target would be because that depends on the broader context, but the point is whenever you are marking SMTs, always pay attention to the next order block that gets formed. Use that, depending on the timeframe, either for your day trades or your swing trades. In this example, since this is a 15-minute chart, it could have been used for day trading, looking at these intraday swings. In the earlier example I mentioned, where the SMT was based on the daily and 4-hour, you would more likely be looking at a swing trade than a day trade.
So that’s about it for today. Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm-funded traders every day, then click the link below the video and hop aboard. We’re looking forward to trading with you.
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