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Usage Guide (Trading Strategies)

Overview​

The SMT/Divergence Suite is a powerful tool for identifying potential trend reversals and trading opportunities through divergence analysis. This guide covers both regular divergence trading and SMT (Smart Money Technique) strategies.

Trading Strategies​

Regular Divergence Strategy​

Bearish Setup​

  1. Identify bearish regular divergence at a high timeframe resistance or PD array
  2. Wait for a liquidity grab above resistance
    • Price should wick above resistance and close below it
    • Look for strong downward reaction
  3. Wait for TRN trend bars to turn red
  4. Entry: Open of the first bar after TRN trend bars change to red
  5. Stop Loss: 2 ticks above the wick high
  6. Target: Last swing low, HTF support level, or PD array
  7. Minimum Risk-Reward: 2R (skip if less)

Bullish Setup​

  1. Identify bullish regular divergence at a high timeframe support or PD array
  2. Wait for a liquidity grab below support
    • Price should wick below support and close above it
    • Look for strong upward reaction
  3. Wait for TRN trend bars to turn green
  4. Entry: Open of the first bar after TRN trend bars change to green
  5. Stop Loss: 2 ticks below the wick low
  6. Target: Last swing high, HTF resistance level, or PD array
  7. Minimum Risk-Reward: 2R (skip if less)

SMT Strategy (Imbalance Trading)​

This strategy focuses on trading imbalances between highly correlated assets, particularly NASDAQ futures (NQ) and S&P 500 futures (ES).

Setup Requirements​

  1. Daily timeframe
  2. NASDAQ futures make a new lower low
  3. S&P 500 futures make a higher low
  4. SMT/Divergence Suite detects bullish regular SMT divergence

Trade Execution​

  1. Entry: Next day's open
  2. Instrument: Use the stronger instrument (typically ES1!)
  3. Stop Loss: Below previous day's low
  4. Target: 3R (three times the risk)

Best Conditions​

  • Most effective in strong trending markets
  • Works with other correlated pairs:
    • BTC vs. ETH
    • GC1! vs. SI1!
    • EURUSD vs. GBPUSD

Example Setup​

For Divergence Trading​

  1. Swing Suite/Divergence Suite Settings:
    • Swing size: 7-15
    • Divergence oscillator: RSI
    • RSI length: 10-14
    • Optional: Show Swing Support/Resistance Levels

For SMT Trading​

  1. SMT/Divergence Suite Settings:
    • SMT/Divergence Source: SMT Symbol
    • For ES/NQ pair trading:
      • SMT Symbol: ES1!
      • Chart: NQ1!
    • Divergence size: 1
    • Display on main chart

Best Practices​

  1. Confirmation

    • Wait for candlestick confirmation
    • Use multiple timeframe analysis
    • Combine with support/resistance levels

  2. Risk Management

    • Always use defined stop losses
    • Maintain minimum 2R risk-reward ratio
    • Consider position sizing based on setup quality

  3. Optimization

    • Adjust swing size based on timeframe
    • Use larger swing sizes for higher timeframes
    • Smaller swing sizes for lower timeframes

  4. Filters

    • Trade in direction of higher timeframe trend
    • Look for confluence with other technical indicators
    • Wait for TRN trend bars color change confirmation
    • Skip trades with poor risk-reward ratios

Advanced Features​

  1. Custom Indicators

    • Use external indicators for divergence detection
    • Combine multiple oscillators for confirmation

  2. Alert Settings

    • Set alerts for TRN trend bar color changes
    • Configure divergence alerts
    • Set SMT divergence notifications

  3. Visual Settings

    • Customize indicator colors and styles

    • Adjust label positions

    • Configure which divergences to display