Smart Money Concept and its application to supply and demand areas in trading. The basic idea is to track the behavior of major players in the market (such as banks and financial institutions) who are believed to move prices.
The image is divided into two main models:
1. Drop-Base-Drop model
This is a bearish continuation model, indicating a strong supply zone, which is the area marked in red (Sell).
* Drop: The price begins a strong downward movement (red candles).
* Base: The price stops falling and enters a phase of fluctuation or accumulation in a narrow range. This area is called the "base" (Base), and it is believed that smart money is gathering sell orders here.
* Drop: The price breaks through the base area and continues to drop strongly.
Trading Strategy:
When the price returns in the future to test the "base" area (the red zone), it is considered an excellent selling opportunity. The expectation is that large sell orders that have not yet been executed are still present in this area, which will push the price down again.
2. Rally-Base-Rally pattern
This is a bullish continuation pattern, indicating a strong Demand Zone, which is the area marked in green (Buy).
* Rally: The price begins a strong upward movement (green candles).
* Base: The price temporarily stops rising and enters a phase of fluctuation. This "base" is where smart money is believed to accumulate buy orders.
* Rally: The price breaks through the base area and continues to rise strongly.
Trading Strategy:
When the price drops in the future to retest the "base" area (the green zone), it is considered an excellent buying opportunity. The expectation is that large buy orders waiting to be executed in this area will support the price and push it up again.
Summary:
The idea is that the "base" areas that precede a strong price movement (upwards or downwards) are very important areas because they represent an imbalance between supply and demand caused by "smart money." Traders use these areas as high-probability entry points, with clear stop-loss levels.
