SMC Trading Strategies

Source: David Woods, Advanced ICT Institutional SMC Trading Book

---

1. Confluence

Confluence refers to a price zone where multiple analytical elements align simultaneously. Rather than relying on a single signal, the core principle is to enter at points where numerous confirming factors overlap, dramatically increasing the probability of a successful trade. In SMC trading, confluence is the process of building a case for "why enter at this specific level" — the more overlapping elements, the higher the likelihood that the setup aligns with institutional algorithm intent.

Core Confluence Elements

These are the primary factors to verify first:

• Daily Cycle Position: Determine where price currently sits within the daily cycle (Accumulation → Manipulation → Distribution). Entering early in the cycle captures large moves; entering late increases the risk of reversal.
• FVG Fill (Fair Value Gap Fill): Zones where HTF Fair Value Gaps are being filled represent key areas where algorithms re-enter the market. The 50% level of an FVG — the CE (Consequent Encroachment) — is a particularly important reaction level.
• LTF AC Mitigation (Low Time Frame Algorithmic Candle Mitigation): Confirm the point at which algorithmic candles are mitigated on lower time frames. This indicates that institutions have executed orders at that price level.
• MS (Market Structure Shift) Confirmation: Verify whether a market structure shift has occurred. The moment the pattern of highs and lows changes is the first signal of a directional reversal.

Risk Entry Confluence

Risk Entry involves entering based solely on HTF analysis without LTF confirmation, so a strong confluence combination is an absolute prerequisite:

• MM Sell/Buy Model Active: Only attempt when the Market Maker model is clearly unfolding. The Accumulation-Manipulation-Distribution flow must be distinct.
• Appropriate Daily Cycle Position: Immediately after the manipulation phase or at the early distribution stage is most ideal.
• Very Strong AC Present: Not an ordinary AC — an algorithmic candle rated "Very Strong" accompanied by significant displacement must exist.
• Extreme Premium/Discount Zone: Price must be positioned at the extreme premium (above 80%) or discount (below 20%) of the overall range.

Practical Tip: Only consider Risk Entry when all four elements are satisfied. If even one is missing, switch to Confirm Entry for safety.

Confirm Entry Confluence

This confluence provides a more stable entry with a higher win rate, as it involves additional confirmation steps:

• HTF Mitigation Awaited: Enter only after confirming price has reacted at a key HTF level (order block, FVG, etc.).
• AHS (Asian High/Low Sweep): Confirm the pattern where the Asian session high or low is swept before price reverses. This signals that institutions have cleared Asian session liquidity.
• AVB (Asia Volume Balance): Identify the volume equilibrium point formed during the Asian session. This level acts as significant support/resistance in subsequent sessions.
• LTF Structure Confirmation: Enter only after a directional reversal structure is completed on lower time frames (5M, 1M).

Advanced LTF Confluence

These additional elements help refine entry timing. They are never used in isolation — they serve to add conviction on top of core confluence:

• AMD (Accumulation Manipulation Distribution): Identify the AMD pattern within the Asian session. After the Asian session forms a range (accumulation), London open sweeps one side (manipulation) and drives price in the opposite direction (distribution) — a classic institutional pattern.
• High Impact Event Influence: Recognize when events such as NFP, FOMC, or CPI act as triggers for liquidity sweeps.
• Retail SNR (Support & Resistance): Support and resistance levels recognized by retail traders are zones where liquidity concentrates. Observe whether these levels get swept.
• Divergence Signals: Divergence with oscillators like RSI is merely a supplementary indicator in SMC on its own, but can serve as an additional confirming factor when combined with other confluence.
• HTF False Flag Patterns: Identify false signals on higher time frames to avoid institutional traps.

Confluence Verification Checklist

1. Confirm that at least three elements overlap at the same price zone
2. Verify HTF-LTF alignment — if HTF has a long bias but the LTF setup is short, discard it
3. Confirm the market cycle position is at an appropriate stage for entry
4. Verify that a liquidity target is clearly identified — if the target is unclear, defer entry
5. Calculate that the risk-to-reward ratio is at least 1:2

Practical Application Principles

• More confluence means higher probability setups, but be cautious of missing opportunities while waiting for the perfect setup
• Relying on a single element makes you no different from a retail trader — always apply multiple confirmations
• With weak confluence (only 1–2 elements met), defer entry and wait for the next opportunity
• Confluence strength varies by session — confluence during London/New York kill zones carries higher reliability than during the Asian session
• Maintain a confluence journal to continuously track which combinations yield the highest win rate in your personal trading

---

2. Top Down Analysis

Top Down Analysis is a systematic analytical method that begins by identifying the overall market structure and liquidity direction on higher time frames (HTF), then progressively drills down to lower time frames (LTF) to pinpoint precise entry points. The core philosophy of this approach is: "HTF determines direction; LTF determines timing." Searching for patterns on LTF without HTF analysis is like navigating without a compass.

Step 1: HTF Structure Analysis

Key Checkpoints:

• Identify Liquidity Pool Locations: Liquidity concentrates at previous swing highs/lows and equal highs/lows. Price tends to gravitate toward these liquidity pools.
• Determine Market Structure Direction: Identify the current trend clearly through the sequential pattern of highs and lows (HH-HL or LH-LL).
• Mark Key Order Block/FVG Levels: Mark areas where institutional orders are concentrated and unfilled FVGs.
• Identify Large FVGs: FVGs on the Daily chart or above have a strong tendency to be filled, acting as price magnets.
• HTF AC (Algorithmic Candle) Analysis: Classify the location and strength of algorithmic candles on higher time frames.

Analysis Priority by Time Frame:

Time Frame	Role	Analysis Focus
Weekly/Daily	Long-term direction	Overall trend, major liquidity pools, large FVGs
4H	Medium-term structure	Swing structure, order blocks, premium/discount zones
1H	Short-term structure	Session-based structure, AC identification, mitigation levels
15M/5M	Entry timing	Precise entry points, stop loss placement, trigger confirmation

Step 2: Identify Cycle Position

Understanding Session Characteristics:

• Asian Session (00:00–08:00 GMT): Forms ranges and accumulates liquidity. The highs and lows of this session become sweep targets in subsequent sessions. As the lowest-volatility period, focus on observation rather than directional trading.
• London Session (08:00–12:00 GMT): Sweeps Asian session liquidity and establishes the direction for the day. The most important initial moves occur here, and many SMC setups form during this window.
• New York Session (13:00–17:00 GMT): Major moves complete and price reaches liquidity targets. The trend initiated during London either continues or reverses via the NY Trap pattern.

Determining Current Position Within the Cycle:

• Identify whether the market is in Accumulation, Manipulation, or Distribution
• Develop at least two scenarios for what may unfold through the next session
• Calculate the distance from current price to the liquidity target to pre-assess R:R

Step 3: LTF Entry Setup Search

LTF Analysis Elements:

• Only wait for patterns aligned with the HTF bias — ignore counter-directional setups no matter how clean they appear
• Confirm a precise entry trigger: LTF MSS, order block mitigation, FVG entry, etc.
• Set an appropriate stop loss: just below/above the LTF swing structure or at the wick end of the HTF AC
• Calculate take profit targets: HTF liquidity pools, large FVGs, opposing order blocks, etc.

Core Principle: No matter how perfect a setup appears on LTF, never enter if it opposes the HTF bias. HTF determines "what to do"; LTF determines "when to do it."

Practical Application Sequence

1. Analyze in order: Weekly → Daily → 4H → 1H → 15M → 5M
2. Entries against the HTF direction are strictly prohibited
3. Never ignore HTF structure on LTF — LTF is merely a detailed map of HTF
4. Clearly separate the role and function of each time frame — avoid the mistake of seeking entry points on the Daily or determining direction on the 5M
5. If analysis takes more than 30 minutes, the setup is unclear — skip that session

Top Down Analysis Checklist

• HTF liquidity direction confirmed
• Premium/Discount zones marked
• Current cycle position (Accumulation/Manipulation/Distribution) identified
• LTF entry conditions established
• Risk management plan (SL, TP, position size) finalized
• HTF-LTF alignment verified

---

3. Entry Types

SMC distinguishes between two primary entry types. Risk Entry and Confirm Entry each have different risk profiles and probability characteristics, so selecting the appropriate type based on market conditions and personal skill level is essential. Clearly understanding both types and having the flexibility to switch between them situationally is the hallmark of a mature trader.

Risk Entry

Entering based solely on HTF analysis, bypassing the LTF confirmation process. Accuracy is lower, but entry occurs at the optimal price, maximizing R:R.

Entry Conditions:

• MM Sell/Buy Model active — the Market Maker model must be clearly unfolding
• Daily Cycle at an appropriate position — immediately after the manipulation phase is ideal
• Very Strong AC present — an algorithmic candle accompanied by strong displacement must exist
• Extreme Premium/Discount zone — price must be at the range extreme (above 80% or below 20%)

Characteristics:

• High R:R ratio (1:3 or greater possible)
• Fast entry without LTF confirmation
• Relatively high failure rate (approximately 40–50%)
• Strong confluence is an absolute prerequisite

Applicable Situations:

• When a clear market direction exists
• When price has arrived at a strong confluence zone
• When a high-probability setup has been pre-identified and awaited

Confirm Entry

Entering after waiting for additional confirmation signals on LTF following HTF analysis. Accepts a slightly less favorable entry price in exchange for a higher win rate.

Entry Conditions:

• HTF Mitigation Complete — price reaction at a key HTF level must be confirmed
• AHS (Asian High/Low Sweep) Confirmed — Asian session liquidity must have been cleared
• AVB (Asia Volume Balance) Achieved — the Asian session volume equilibrium point must be confirmed
• LTF Structure Confirmation Complete — an MSS (Market Structure Shift) must occur on the 5M or 1M chart

Characteristics:

• High success rate (70–80%)
• Stable entry with lower psychological burden
• Lower R:R ratio (1:1.5–2)
• Limited entry opportunities; setups may occasionally be missed

Applicable Situations:

• When market direction exists but uncertainty remains
• When you are a beginner or a conservative approach is needed
• When capital preservation is the top priority
• During psychological recovery periods following consecutive losses

Stop Loss Placement Rules

Entry Type	Stop Loss Placement	BE Transition Condition	Additional Conditions
Risk Entry	Above/below HVI	Upon BOS (Break of Structure) confirmation	Minimum 3 confluence factors required
Confirm Entry	Just below/above confirmed structure	Upon re-confirmation failure	Immediate exit; no re-entry allowed

Detailed Stop Loss Guidelines

HVI (High Volume Imbalance) Application:

• Long positions: Place SL below the bottom of HVI
• Short positions: Place SL above the top of HVI
• Add a minimum 10–15 pip buffer to prevent unnecessary stops triggered by wicks
• For cryptocurrency, adjust the buffer based on ATR according to volatility

BE (Break Even) Management:

• Move SL to entry price upon BOS (Break of Structure) confirmation
• Maintain the position after BE transition until additional confirmation signals appear
• Premature BE transitions can actually reduce profit opportunities — only execute when there is structural justification

Entry Type Selection Criteria

Decision Factor	Risk Entry	Confirm Entry
Market Clarity	High	Low to Medium
Confluence Strength	Strong (4+ factors)	Moderate (2–3 factors)
Personal Style	Aggressive	Conservative
Account Status	Healthy (on a winning streak)	In drawdown or recovery
Experience Level	Advanced	Beginner to Intermediate

Practical Tip: Most traders should start with Confirm Entry, accumulate sufficient backtesting and live experience, and then gradually introduce Risk Entry. Begin with a 7:3 ratio (Confirm:Risk) and adjust over time.

---

4. Price Action Confirmation

Algorithms generate fake price action (PA) patterns approximately 80% of the time. Traditional candlestick patterns such as pin bars, engulfing candles, and dojis appearing in isolation do not constitute valid entry signals. However, PA patterns that form at specific locations (confluence zones) can serve as genuine confirmation signals reflecting actual institutional algorithm intent. The key principle is: "Not what formed, but where it formed."

Characteristics of Fake PA Patterns

These are manipulated patterns created by institutional algorithms to lure retail traders:

• Patterns formed in isolation: Pin bars, engulfing candles, etc. appearing without any context are mostly noise
• Patterns at zones without confluence: Patterns formed at locations unrelated to key HTF levels are to be ignored
• Noise patterns just before news: Patterns forming immediately before high-impact news releases are distortions caused by spread widening and volatility
• Patterns designed to lure retail traders: The more textbook-perfect a pattern appears, the higher the probability it is a trap — institutions know exactly what patterns retail traders have been taught

Conditions for Identifying Genuine PA Patterns

Required Elements (all must be satisfied):

• Formed at a confluence zone: The location must coincide with key HTF levels such as order blocks, FVGs, or liquidity pools
• Rejection Block formation: A candle with a strong wick must form at the relevant level
• Accompanied by displacement: A strong momentum move in the opposite direction must follow the rejection
• Aligned with HTF structure and direction: The pattern's direction must match the HTF bias

Additional Confirming Factors:

• Patterns formed after Strong AC mitigation
• Patterns appearing immediately after a liquidity sweep — patterns formed without a preceding sweep carry lower reliability
• Rejections occurring during London/New York kill zone hours
• Patterns forming inside an FVG — particularly high reliability when forming at the CE (50%) of the FVG

Rejection Block + Displacement Pattern

This combination is the cornerstone of PA confirmation in SMC. When these two occur in sequence, there is a high probability that actual institutional order execution has taken place.

Identifying a Rejection Block:

• A sudden reversal appears after a strong rally or decline
• Accompanied by high volume, indicating traces of institutional orders
• A distinctly long wick with a small body forms
• Occurs at a prior structural level (order block, FVG, liquidity pool)

Confirming Displacement:

• Immediately after the rejection block forms, a strong move in the opposite direction occurs
• Ideally accompanied by the formation of a new FVG
• Accompanied by a break of prior LTF structure (BOS/MSS)
• Strong momentum sustains for at least 2–3 candles

Practical Application Process

1. PA pattern spotted → Never enter immediately
2. Verify location → Confirm it is within a confluence zone
3. Wait for Rejection Block formation → Verify it is a structural rejection, not just a candle
4. Confirm displacement → Enter only after confirming sufficient directional momentum
5. Re-verify HTF structure alignment → As a final step, confirm consistency with the HTF bias

PA Confirmation Checklist

• Formed within a confluence zone
• Rejection block is clearly identifiable
• Displacement is present
• Direction aligns with HTF bias
• Not during algorithmic manipulation windows (just before news, non-kill zone hours)
• Liquidity sweep preceded the pattern

Warnings

• Entering on a standalone PA pattern without SMC confluence is strictly prohibited — this is the decisive difference between retail trading and SMC trading
• Apply objective criteria rather than emotional interpretation — judge by "a rejection block formed at this level," not "this looks like a pin bar"
• The location of the pattern is always more important than the pattern itself
• Always remember that 80% of patterns are fake — if in doubt, do not enter
• Using traditional candlestick analysis (hammers, shooting stars, etc.) without SMC context can lead you directly into institutional traps

---

5. Ping Pong Strategy (Ping Pong Mastery)

The Ping Pong Strategy is a scalping technique that exploits the sharp bidirectional volatility occurring during high-impact news events or London/New York open sessions. It leverages the characteristic where price bounces back and forth — like a ping pong ball — between ranges or liquidity pools, pursuing profits in both directions. However, this strategy must be used restrictively under specific conditions only, without attempting to capture every move. It is an advanced technique designed for the most experienced traders.

Usage Conditions

Mandatory Conditions (strategy cannot be executed if any are missing):

• High Impact News or LO (London Open) / NYO (New York Open) time window
• HVI 1H present — a High Volume Imbalance must be identifiable on the 1-hour chart
• ALS (Asian Low Sweep) completed — the Asian session low must have been swept
• Post NY Trap Mitigation — only begin after the New York Trap pattern has been mitigated

Applicable Time Windows:

• London Open: 07:00–09:00 GMT — the directional establishment phase following Asian liquidity sweeps
• New York Open: 12:00–14:00 GMT — peak volatility zone due to overlap with the London session
• High Impact News: NFP, FOMC, CPI, PPI, ECB rate decisions, etc. — sharp bidirectional spikes occur

Ping Pong Entry Conditions

Market Environment Verification:

1. High volatility: ATR expanded to 1.5x or more above the average
2. Clear range formation: A range with liquidity stacked on both sides must be identifiable
3. Bidirectional liquidity present: Sweep targets must exist on both the upper and lower ends
4. Rapid rejection patterns: Price sweeps one side and quickly rejects in the opposite direction

Entry Signals:

• Strong Rejection occurs at the upper or lower boundary of the range
• Reversal appears accompanied by displacement
• Immediately after a liquidity sweep, a counter-directional move begins
• Momentum shift is confirmed alongside FVG formation

Core Principle: The Ping Pong Strategy is a rapid, repeated application of the SMC principle that "after institutions sweep liquidity on one side, they drive price toward the liquidity on the opposite side."

Risk Management Rules

Because the Ping Pong Strategy involves rapid execution and high volatility, risk management must be far more stringent than standard trading.

Position Management:

• Limit to a maximum of 3 consecutive entries — if exceeded, terminate the session
• Set tight stop losses (5–10 pips or just above/below structural levels)
• Take profits quickly (10–20 pips) — greed in a ping pong environment causes profits to be returned
• All positions must be closed before the session ends

Capital Management:

• Use half or less of your standard position size
• Set a daily maximum loss limit in advance and stop immediately upon reaching it
• After 2 consecutive losses, stop for the session and review
• Evaluate weekly performance before deciding whether to continue the following week

Pre-Execution Checklist

• Full understanding of the SMC narrative (cycle position, MM model) confirmed
• High Impact Event or LO/NYO time window confirmed
• HVI 1H + ALS + NY Trap conditions all satisfied
• Risk management plan (position size, max loss, max number of entries) finalized
• Emotional control state verified — no urgency or revenge trading impulses
• Spread conditions checked — defer entry if spreads are abnormally wide

Warnings and Prohibitions

Strictly Prohibited:

• Attempting Ping Pong during regular sessions (outside kill zones)
• Applying the strategy without fully mastering the narrative
• Allowing the strategy to devolve into emotional trading (revenge trading, FOMO)
• Violating pre-established rules (maximum 3 entries, position size limits, etc.)

Risk Factors:

• Wide spread periods — spreads can widen to dozens of pips immediately before and after news releases
• Low liquidity periods — orders may not fill without slippage
• Unexpected news releases — geopolitical events beyond scheduled economic data
• Server instability periods — exchange/broker server latency can be fatal

Performance Evaluation Criteria

Success Indicators (the strategy should only continue if these are maintained):

• Win rate sustained at 60% or above
• Average R:R of 1:1.5 or better
• Monthly return target achieved
• Maximum drawdown kept within defined limits

Failure Indicators (if any apply, suspend the strategy and reassess):

• Losses occurring 3 consecutive days
• Repeated rule violations
• Increasing awareness of emotional decision-making
• Tendency to attempt Ping Pong during non-kill zone regular sessions

The Ping Pong Strategy demands a high degree of focus, rapid decision-making, and rigorous discipline simultaneously. It is strongly recommended to begin live application only after accumulating at least 6 months of SMC live trading experience and achieving consistent Confirm Entry performance. Practicing the Ping Pong Strategy a minimum of 50 times on a demo account before transitioning to a live account is the prudent approach.