Andrew.

Andrew.

17-12-2021

10:35

Every SMC trader has shown this reversal setup many times. But I would like to talk with you about the "validation" and "invalidations" of this simple but useful logic. The tips I will describe are based on my backtests which helped me increase my wins and avoid stupid losses.

Target (validation) You have to see the clear target. It can be a weak low or price imbalance which will be a magnet for a new order flow.

Volume divergence (validation) You should see a weak trend confirmed with volume divergence. The last movement before LG can be with increased volume, it is a manipulative movement that pushes the price to liquidity and in the future, the whole trend may become a "BTS" on HTF.

Weak trend (validation) You should see liquidity build for the next order flow move.

Momentum shift (validation) A big plus to the validity will also be a change in the momentum which will confirm the weak trend and volume divergence.

Time (validation) London and New York killzone, as well as overlap, are the most volatile times. During this time, you will often be able to see manipulative movements. If we add here the optimal trade entry area, it will be a strong indicator of the validity of your setup.

LTF Confirmation (validation) For more certainty, we can also wait for confirmation from smaller time frames.

Target (invalidation) In this situation, it is better to reconsider your plan. when the target is protected you can easily get on the continuation of the trend and become liquidity for the continuation.

Opposite liquidity (invalidation) Often after reacting to an area of interest from a higher timeframe, the price leaves inducement for deeper mitigation. If you have not been able to correctly determine where the liquidity is, then the liquidity is you.

Aggressive pullback (invalidation) Even with the validity of your analysis, such movements can easily knock out your stop-loss. Be attentive to what the price has done and what is going to be done.

Order Flow (invalidation) If the price has mitigated the opposite origin and continues order flow in the lower timeframes it is better to get away from the computer and make a cup of tea.

Let's Check on a real example. What do we have? Confirmations: Stong high and weak low, Volume divergence, London Killzone. Invalidations: Aggressive pullback, Bullish momentum. What we should do next? Find more confirmations on a lower time frame.

LTF confirmation. In this case from invalidations, we have only opposite liquidity. But structure > liquidity



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