SMT/Divergence Suite Trading Strategies
The TRN 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​
- Identify bearish regular divergence at a high timeframe resistance or PD array
- Wait for a liquidity grab above resistance
- Price should wick above resistance and close below it
- Look for strong downward reaction
- Wait for TRN trend bars to turn red
- Entry: Open of the first bar after TRN trend bars change to red
- Stop Loss: 2 ticks above the wick high
- Target: Last swing low, HTF support level, or PD array
- Minimum Risk-Reward: 2R (skip if less)
Bullish Setup​
- Identify bullish regular divergence at a high timeframe support or PD array
- Wait for a liquidity grab below support
- Price should wick below support and close above it
- Look for strong upward reaction
- Wait for TRN trend bars to turn green
- Entry: Open of the first bar after TRN trend bars change to green
- Stop Loss: 2 ticks below the wick low
- Target: Last swing high, HTF resistance level, or PD array
- 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​
- Daily timeframe
- NASDAQ futures make a new lower low
- S&P 500 futures make a higher low
- SMT/Divergence Suite detects bullish regular SMT divergence
Trade Execution​
- Entry: Next day's open
- Instrument: Use the stronger instrument (typically ES1!)
- Stop Loss: Below previous day's low
- 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​
- 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​
- 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​
-
Confirmation
- Wait for candlestick confirmation
- Use multiple timeframe analysis
- Combine with support/resistance levels
-
Risk Management
- Always use defined stop losses
- Maintain minimum 2R risk-reward ratio
- Consider position sizing based on setup quality
-
Optimization
- Adjust swing size based on timeframe
- Use larger swing sizes for higher timeframes
- Smaller swing sizes for lower timeframes
-
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​
-
Custom Indicators
- Use external indicators for divergence detection
- Combine multiple oscillators for confirmation
-
Alert Settings
- Set alerts for TRN trend bar color changes
- Configure divergence alerts
- Set SMT divergence notifications
-
Visual Settings
- Customize indicator colors and styles
- Adjust label positions
- Configure which divergences to display