Bikesh Maskey
SMART MONEY CONCEPTS IN THE FOREX MARKET
A strategy for Individual Traders
Thesis
CENTRIA UNIVERSITY OF APPLIED SCIENCES
Bachelor of Business Management
July 2021
,ABSTRACT
Centria University Date Author
of Applied Sciences July 2021 Bikesh Maskey
Degree programme
Bachelor of Business Management
Name of thesis
SMART-MONEY CONCEPTS IN THE FOREX MARKET. A strategy for individual traders
Centria supervisor Pages
Paula Tornikoski 60+ 3
The foreign exchange market, Forex is the most liquid and the most popular market. The main goal of
this study was to create a simple profitable trading strategy for new traders using smart money con-
cepts in the Forex Exchange (Forex) market. The author has a strong passion for this market. The au-
thor has tested and tried many different strategies and has found this smart concept strategy to be most
useful and profitable.
The thesis consists of an introduction, and the theoretical and empirical research parts. The thesis
gives us the introduction to the forex market and terms used in forex trading, the movement behind
the price in the market, the analysis, and the risk and capital management in the currency market. The
empirical part consists of a trading strategy which was created combining various smart money con-
cepts and strategies found on the internet along with the experience of the author trading forex. The
complete strategy was kept and explained in a simple way along with the methods to implement it.
With lots of different strategies online, the author found out this smart money concept strategy to be
the most successful. The risk management in the strategy is developed in a way that the traders will be
profitable even if their ratio of losing trade is bigger than their winning trade. The main points to con-
sider using this strategy is to get a good knowledge of the market structure, supply and demand, and
risk management and practice it a lot in a demo account before using it to trade with real money.
Key words
Break of structure, Forex Exchange Market (Forex), mitigation, smart money, supply and demand.
,ABSTRACT
CONTENTS
1 INTRODUCTION ........................................................................................................................... 1
2 UNDERSTANDING THE FOREX MARKET .............................................................................. 2
2.1 How does the market move? ..................................................................................................... 2
2.2 Forex Terms ............................................................................................................................... 3
2.2.1 Currency Pairs.................................................................................................................. 3
2.2.2 Leverage ............................................................................................................................ 3
2.2.3 Bid/Ask price & Spread ................................................................................................... 4
2.2.4 Long/Short position .......................................................................................................... 5
2.2.5 Margin .............................................................................................................................. 5
2.2.6 Pips ....................................................................................................................................5
2.2.7 Lot size .............................................................................................................................. 6
2.2.8 Bullish and Bearish trend .................................................................................................6
2.2.9 Stop-loss and Take profit order ....................................................................................... 7
2.3 Forex vs Stock markets ............................................................................................................. 7
3 TECHNICAL ANALYSIS AND PATTERNS ............................................................................... 9
3.1 Support and resistance .............................................................................................................. 9
3.2 Trend line ................................................................................................................................. 10
3.3 Head and Shoulder .................................................................................................................. 11
3.4 Pennants ................................................................................................................................... 12
3.5 Flags ......................................................................................................................................... 13
3.6 Wedges ..................................................................................................................................... 14
3.7 Triangles .................................................................................................................................. 15
3.8 Double Top and Double Bottom ............................................................................................. 16
4 FUNDAMENTAL ANALYSIS ..................................................................................................... 19
5 SMART MONEY .......................................................................................................................... 21
6 MARKET CYCLE ........................................................................................................................ 23
6.1 Accumulation Phase ................................................................................................................ 23
6.2 Mark-up Phase ........................................................................................................................ 23
6.3 Distribution Phase ................................................................................................................... 23
6.4 Mark-down Phase .................................................................................................................... 24
7 MARKET STRUCTURE ............................................................................................................. 25
7.1 Break of structure.................................................................................................................... 26
8 IMBALANCES ............................................................................................................................. 29
9 SUPPLY AND DEMAND ZONES ............................................................................................... 31
9.1 Finding a Supply and Demand Zone ...................................................................................... 32
9.2 Refining the Supply and Demand Zones ................................................................................ 34
, 10 MULTIPLE TIMEFRAME ANALYSIS.................................................................................... 36
10.1 Lower timeframe Structure .................................................................................................. 39
11 SUPPLY AND DEMAND PATTERNS ...................................................................................... 41
11.1 Rally-Base-Drop .................................................................................................................... 41
11.2 Rally-Base-Rally .................................................................................................................... 42
11.3 Drop-Base-Rally .................................................................................................................... 42
11.4 Drop-Base-Drop .................................................................................................................... 43
12 SMART MONEY TRADING IN SUPPLY AND DEMAND ZONES ...................................... 45
12.1 SUPPLY AND DEMAND BOUNCE .................................................................................... 46
13 COMPILING THE STRATEGY ............................................................................................... 47
13.1 Trend continuing patterns .................................................................................................... 47
13.2 Reversal of the trend ............................................................................................................. 49
14 LOWER TIMEFRAME CONFIRMATION ............................................................................. 51
15 TRADING STRATEGY ............................................................................................................. 53
16 CAPITAL MANAGEMENT ...................................................................................................... 56
17 RISK MANAGEMENT .............................................................................................................. 57
17.1 Stop-loss order ....................................................................................................................... 57
17.2 Risk to Reward Ratio ............................................................................................................ 58
18 CONCLUSIONS.......................................................................................................................... 60
REFERENCES.....................................................................................................................................
SMART MONEY CONCEPTS IN THE FOREX MARKET
A strategy for Individual Traders
Thesis
CENTRIA UNIVERSITY OF APPLIED SCIENCES
Bachelor of Business Management
July 2021
,ABSTRACT
Centria University Date Author
of Applied Sciences July 2021 Bikesh Maskey
Degree programme
Bachelor of Business Management
Name of thesis
SMART-MONEY CONCEPTS IN THE FOREX MARKET. A strategy for individual traders
Centria supervisor Pages
Paula Tornikoski 60+ 3
The foreign exchange market, Forex is the most liquid and the most popular market. The main goal of
this study was to create a simple profitable trading strategy for new traders using smart money con-
cepts in the Forex Exchange (Forex) market. The author has a strong passion for this market. The au-
thor has tested and tried many different strategies and has found this smart concept strategy to be most
useful and profitable.
The thesis consists of an introduction, and the theoretical and empirical research parts. The thesis
gives us the introduction to the forex market and terms used in forex trading, the movement behind
the price in the market, the analysis, and the risk and capital management in the currency market. The
empirical part consists of a trading strategy which was created combining various smart money con-
cepts and strategies found on the internet along with the experience of the author trading forex. The
complete strategy was kept and explained in a simple way along with the methods to implement it.
With lots of different strategies online, the author found out this smart money concept strategy to be
the most successful. The risk management in the strategy is developed in a way that the traders will be
profitable even if their ratio of losing trade is bigger than their winning trade. The main points to con-
sider using this strategy is to get a good knowledge of the market structure, supply and demand, and
risk management and practice it a lot in a demo account before using it to trade with real money.
Key words
Break of structure, Forex Exchange Market (Forex), mitigation, smart money, supply and demand.
,ABSTRACT
CONTENTS
1 INTRODUCTION ........................................................................................................................... 1
2 UNDERSTANDING THE FOREX MARKET .............................................................................. 2
2.1 How does the market move? ..................................................................................................... 2
2.2 Forex Terms ............................................................................................................................... 3
2.2.1 Currency Pairs.................................................................................................................. 3
2.2.2 Leverage ............................................................................................................................ 3
2.2.3 Bid/Ask price & Spread ................................................................................................... 4
2.2.4 Long/Short position .......................................................................................................... 5
2.2.5 Margin .............................................................................................................................. 5
2.2.6 Pips ....................................................................................................................................5
2.2.7 Lot size .............................................................................................................................. 6
2.2.8 Bullish and Bearish trend .................................................................................................6
2.2.9 Stop-loss and Take profit order ....................................................................................... 7
2.3 Forex vs Stock markets ............................................................................................................. 7
3 TECHNICAL ANALYSIS AND PATTERNS ............................................................................... 9
3.1 Support and resistance .............................................................................................................. 9
3.2 Trend line ................................................................................................................................. 10
3.3 Head and Shoulder .................................................................................................................. 11
3.4 Pennants ................................................................................................................................... 12
3.5 Flags ......................................................................................................................................... 13
3.6 Wedges ..................................................................................................................................... 14
3.7 Triangles .................................................................................................................................. 15
3.8 Double Top and Double Bottom ............................................................................................. 16
4 FUNDAMENTAL ANALYSIS ..................................................................................................... 19
5 SMART MONEY .......................................................................................................................... 21
6 MARKET CYCLE ........................................................................................................................ 23
6.1 Accumulation Phase ................................................................................................................ 23
6.2 Mark-up Phase ........................................................................................................................ 23
6.3 Distribution Phase ................................................................................................................... 23
6.4 Mark-down Phase .................................................................................................................... 24
7 MARKET STRUCTURE ............................................................................................................. 25
7.1 Break of structure.................................................................................................................... 26
8 IMBALANCES ............................................................................................................................. 29
9 SUPPLY AND DEMAND ZONES ............................................................................................... 31
9.1 Finding a Supply and Demand Zone ...................................................................................... 32
9.2 Refining the Supply and Demand Zones ................................................................................ 34
, 10 MULTIPLE TIMEFRAME ANALYSIS.................................................................................... 36
10.1 Lower timeframe Structure .................................................................................................. 39
11 SUPPLY AND DEMAND PATTERNS ...................................................................................... 41
11.1 Rally-Base-Drop .................................................................................................................... 41
11.2 Rally-Base-Rally .................................................................................................................... 42
11.3 Drop-Base-Rally .................................................................................................................... 42
11.4 Drop-Base-Drop .................................................................................................................... 43
12 SMART MONEY TRADING IN SUPPLY AND DEMAND ZONES ...................................... 45
12.1 SUPPLY AND DEMAND BOUNCE .................................................................................... 46
13 COMPILING THE STRATEGY ............................................................................................... 47
13.1 Trend continuing patterns .................................................................................................... 47
13.2 Reversal of the trend ............................................................................................................. 49
14 LOWER TIMEFRAME CONFIRMATION ............................................................................. 51
15 TRADING STRATEGY ............................................................................................................. 53
16 CAPITAL MANAGEMENT ...................................................................................................... 56
17 RISK MANAGEMENT .............................................................................................................. 57
17.1 Stop-loss order ....................................................................................................................... 57
17.2 Risk to Reward Ratio ............................................................................................................ 58
18 CONCLUSIONS.......................................................................................................................... 60
REFERENCES.....................................................................................................................................
