Smart Money VS Technical Analysis

You can find information about technical analysis anywhere: any broker or exchange, after registration, will offer you training in the basics of technical analysis.

Technical Analysis (TA) is a set of tools and patterns for Siacoin Price Prediction likely price changes, Based on patterns in the past, Under similar circumstances. That is, in simpler terms, this is a theory about the figures and tools that were worked out earlier and “should” be worked out in the future.

 

In fact, these are tools that do not have any logic at all and were created by smart people to manipulate ignorant capital, because people love simplicity and ease, which is why finding a triangle on a chart is the easiest way to hunt for a “mammoth”.

There are many tools. The most common of them are resistance/support levels, trend lines, triangles, head and shoulders, flags, and more. In this article, we will show the true essence. TA and introduce you to a concept that is based on the logic of manipulation, and not just on hope.

 

Market maker

A market maker (MM) is a “big player”, which can be in the form of central banks, pension/venture/insurance funds, investors, etc.

A “big player”, having huge capital in circulation, can put the price in one direction or another. He manipulates the crowd by drawing figures of technical analysis and creating a resource for himself, for the future taking a position and turning the market for his own purposes.

Traders trading TA become the main object of manipulation for the Market Maker.

Liquidity is the property of an asset to be quickly redeemed/sold without a significant impact on the price. In order to purchase an asset, you need an application for its sale, that is, a resource.

In the Smart Money concept, liquidity is what we mean by stop orders of traders trading 

 

Technical analysis.

• Why is liquidity important? Because it is the main goal of the market maker, the market maker aims to hit the stops of the retail players.
• Why does he want to do this ? Because it is an effective way to gain a position. He uses the resource of retail traders’ stops to fill his position.
• And for this, the Market Maker will do various manipulations and form technical analysis tools, such as: support and resistance levels, trend lines, technical analysis figures and others. The concept of Smart Money gives us an understanding of how not to become liquidity .

How stock positions work

In order to understand how liquidity works , you need to know how positions on the exchange and stop losses work .

Therefore, consider an example of how positions on the stock exchange work :

• With a short position, you rent an asset from a broker and sell it now, hoping to buy it back at a cheaper price, repay the debt to the broker and profit from the price drop.
• That is, you borrow an asset from a broker for $1,000 and sell it now , the price dropped to $850, you close the position and give the broker its asset.
• As a result, your profit was $150: you sold at a higher price and bought at a cheaper one .
• With a long position, you simply buy an asset at a cheaper price and sell it at a higher price.

How does a stop order work?

And now let’s look at the mechanics of the stop loss :

Stop is a tool that allows you to control your loss, in accordance with your trading şişli escort idea and risk management.

• Stop losses are higher for a short position and lower for a long position.

How liquidity works

Liquidity is not just stops for market players, it is the fuel for a set of market maker positions .

MM generates liquidity, it simply does not have enough market resources to fill its position and reverse the price direction, so it will use various manipulations and form technical analysis tools in order to mislead retail traders and use their stop orders to fill your position and turn the market.

 

In general, with the correct identification of liquidity in the market, we are helped by the main tools that retail traders use, that is, this is a trend line, support and resistance levels.

• Retailers trade, either a rebound from the level, or a breakdown of the level, Which is why there are a lot of orders for sale/purchase below it.
• Look at the example below: The market maker shows that everything seems to be going according to their scenario,  Comes back to activate their orders, and goes in the right direction without them. Due to such manipulations, a set of large positions occurs.

Realizing that most people place their stop orders either by trend or by level, the logical statement follows that there is a large amount of money behind them, which attracts the Market Maker .

Liquidity can be both a place for a price reversal and a fuel to continue moving.

Curly patterns KTA

Consider the most common reversal pattern – the “symmetrical triangle”. This pattern is traded after the breakdown of the lower level for a reversal into shorts. Liquidity is formed on both sides of the pattern, 

The “big player”,  Having collected it from one side, will open a position for “shaving off” the opposite side. The mathematical expectation of working out such a formation is below 20%. Let’s take an example below: