Interbank price formation algorithm

Interbank price formation algorithm



Interbank price formation algorithm.

SMT Divergence

SMT (Smart Money Technique) Divergence - is a divergence the prices of correlated assets or the relationship to the inverse correlated assets.
Analysis of SMT divergence - allows you to determine the institutional structure of the market
What does smart money do: accumulate or distribute.
Currency pairs are easy to analyze with the US dollar index DXY.
Every price swing must be confirmed by market symmetry.
The emergence of price asymmetry indicates the emergence of SMT Div and a likely trend reversal.

SMT Divergence on Accumulation

SMT Divergence in Distribution

Opening price

Opening price of the day / week / month (DO / WO / MO) - this is the level of placing the volume of orders of market participants.
Acts as an important liquidity zone, to which the price seeks to return within a period.
Price interacts with the opening level in 4 ways:
- Accumulation below the level
- Distribution above the level
- Flip level
- Level sweep
Recommended to use in combination with models of trading algorithms (discussed in the next topic).

Opening price. Distribution of price above the DO

Distribution of price above the DO level, as a rule, occurs in the Asian and London sessions.
In the New York session, the price is delivered to the opening level or lower. In this case, distribution occurs without a test of the DO level.
Entry is considered in the London or New York session.
Often the price is delivered to the DO and possibly lower to the discount of the older TF is carried out on time - before closing London session.

Opening price. Accumulation below the DO level

Accumulation of the price below the level of D0, as a rule, occurs in the Asian and London sessions.
In the New York session, the price is delivered to the opening level or higher.
In this case, the accumulation occurs without a test of the DO level.
Entry is considered in the London or New York session.
Often the price delivery to DO and possibly higher in the premium of the older TF is carried out on time - before closing London session.

Opening price. DO Level Flip

DO level flip - the price is delivered under/above the DO where liquidity is collected and reversed. After that, the structure breaks down with closing above/below DO.
Such a PA indicates a change in the nature of the market.
-Can occur in any session.
-The highest mining volatility
-London and New York sessions.
-Entry is considered in the London or New York session.
-Often, price delivery after a DO flip is performed on time - before the close of the London session.

Opening price. DO Level Sweep

DO level sweep - the price consolidates under/above DO, after which an aggressive liquidity sweep from the level occurs DO.
As a rule, it takes place in the London and New York sessions.
The entry is considered after the DO sweep and the breakdown of the structure on the price correction.
Often, price delivery after a DO sweep is performed in time - before the close of the London session.

Delivery models prices:

- There are 6 main patterns of the intraday algorithm, according to which the daily price range is formed.
- These templates are not limited to intraday trading, the logic of their implementation is also extended to weekly and monthly trading ranges (ranges).
- Brokers who supply quotes to traders in the trading terminal receive the price from the liquidity provider, where the last in the chain is the central bank - the true market maker.
- All quotes that traders see on the chart are delivered through the interbank delivery algorithm prices - IPDA (Interbank Price Delivery Algorithm)

Reversal to London and continuation to NY

Reversal to London and continuation to NY or Classic Buy/Sell Day(Classic Buy/Sell Day) - this is one of the most comfortable intraday trading algorithms, where the entry point, as a rule, is provided both in London and New York session.

Features of the intraday trading algorithm:

-Purchases/sales are considered after the price reaches the key zone of interest of the senior TF in the premium/discount (opening of the day, high/loy of the previous day/week/month, OB, BB, BTS/STB, SnD).

-As a rule, the price aggressively approaches the key zone of interest of the older TF - this should not mislead the trader.

Reversal to London and continuation to NY

- On a buy day, if the price trades above the *open level*, wait until it falls below the open price. On the day of sales, the opposite is true.
- If you fail to open a position at the time of the reversal of the London trading session, you should wait for the opening of the New York session.
- After a reversal in the London session, the market provides an opportunity to enter the continuation of the movement during the New York session.
- The distance from the opening price to the zone of interest averages 15-30 pips. If the price movement in the London session exceeds 30 pips, you should wait for the opening of trading in New York.
- This algorithm is most often formed on Monday, Tuesday, Wednesday.

Swing to London and reversal at open NY/or close of London

Swing to London and reversal at open NY/or close of London (London Swing To NYO / LC Reversal)- the second most important reversal trading intraday algorithm.

Features of the intraday trading algorithm:

• During the Asian, London and possibly During the New York sessions, the price sweeps the opening level of the day and starts to rally, but having reached the key zone of interest of the older timeframe (high/low of the previous Day/Week/Month, OB, BB, BTS/STB,SnD) forms a reversal swing.
The algorithm will be similar to the Classic buy/sell day.

Swing to London and reversal at open NY/or close of London

- Instead of forming a correction, consolidation and continuation at the New York open, the price reverses at the daily level maximum.
- The subsequent rally captures the swings of New York, London and Asia.
- As a rule, at the closing of the London market in eventually consolidated before the new trading day.
- This algorithm is considered within the MMBM/MMSM trading models.

Swing to London with compression to New York

Swing to London with compression to New York (London Swing to Z Day) - this intraday trading algorithm usually occurs in the middle of a strong price movement, when the price makes a minor correction during the London session, forming a swing and then consolidating compression before continuation of the impulse.
If it is not possible to open a position at the time of the formation of the London swing, it is recommended to avoid trading during the New York session.
This algorithm is most often formed on Wednesday and Thursday, after several days of trend movement.

Taking off the swings of London to New York

Taking off the swings of London to New York (London Swing To Seek & Destroy) - this intraday trading algorithm, as a rule, occurs within the equilibrium of global consolidation, or at the moment of completion of the price movement upon reaching the key areas of interest of the older TF (opening of the day, high/loy of the previous day/week/month, OB, BB, BTS/STB, S&D).
It is characterized by the liquidity withdrawal of the Asian session swings into the London session, followed by the liquidity withdrawal from the London session swings into the New York session.
It is not recommended to trade this intraday algorithm.

Consolidation before the rally at the New York open/London close

Consolidation ahead of NYC rally /London Close (Range To New York Open / London Close Rally) - this intraday trading algorithm is often formed on the day of the release of important news (NFP, FOMC, interest rates, and others).
Features of the intraday trading algorithm:
-Consolidation during the Asian and London sessions.
-Withdrawal of liquidity from the swings of the London and possibly the Asian sessions, usually at the open of the New York session, followed by a strong price movement at the time of the news release.

Consolidation raid during news release

Consolidation raid during news releases(Consolidation Raid On News Release) - this intraday trading algorithm is often formed on the day of the release of important news (NFP, FOMC, interest rates, and others).
Features of the intraday trading algorithm:
-The price consolidates before the release of important news, as a rule, during the Asian and London sessions.
-Liquidity raid from consolidation at the time of news release with a test of an important area of interest or withdrawal liquidity from the old swing.
-The price reverses, followed by a true move.

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