THE NOTORIOUS HANDBOOK

VOLUME 1
 Chapter 1 Introduction

Before we discuss anything trading related, you must understand the basics of
the U.S Stock market. There are three main indexes in the U.S which are the S&P-500,
known as (SPY, SPX, AND ES), the Nasdaq, known as (NQ, QQQ, AND NAS), and lastly,
the Dow Jones, known as (DOW, DJI, OR US30).
The NASDAQ ticker refers to the stock market on which technology-focused
companies such as AAPL, MSFT, AMZN, META, and NVDA. Below is the sector weighted
for the QQQ index (Nasdaq).

As you can see above, the Nasdaq is comprised of around 50% of technology stocks.
Apple is the biggest company in the world and holds around 11% weight in the QQQ
index.

As for the S&P-500 index, it is a much broader index covering much more sectors,
however, tech is still weighted heavily at around 30%. (shown below)
 For our purposes, we recommend picking one of the two through trial (paper
trading) and sticking to one. Most traders find that the US30 is too volatile and very
difficult to trade.
Now how do we as retail traders make money in the stock market? It may look
easy but there are many technicalities that we will get into. However, for the first
chapter, we will be going over the basics. Traders make money by either going long on
(also known as buying calls). When traders are long it means they are invested in an
option or buy that will return profit when the stock goes up. However, when traders
are short (also known as puts), they make money when the stock price goes down.
Options specifically are termed calls and puts, and MT4 and futures are referred to as
buy or sell(long and short).

But what is a stock option? Well, a stock option is a financial contract that gives
the holder the right, but not the obligation, to buy or sell a specific amount of stock at a
predetermined price (strike price) within a specified period of time. It provides the
opportunity to profit from the price movements of the underlying stock without
owning the actual shares. If stock options are new to you we recommend watching this
short video before continuing. Stock Options Explained
Now what makes options unique and derive how much profit you stand to lose,
or gain? The options Greeks are very important to understand and analyze before
investing any money (even in a paper trading account). The Greeks are Delta, Gamma,
Theta, Vega, and Rho. For our trading, we will mostly focus on Theta, Delta, and
Gamma.
Delta: measures the sensitivity of an option's price to changes in the underlying stock price. A
call option with a delta of 0.5 means that for every $1 increase in the stock price, the option's
price would increase by $0.50. A put option with a delta of -0.5 means that for every $1 increase
in the stock price, the option's price would decrease by $0.50.

Gamma: reflects the rate of change in an option's delta in response to changes in the underlying
stock price. It measures the convexity of the option's delta. For example, if an option has a
gamma of 0.1, its delta will increase by 0.1 for every $1 increase in the stock price.

Theta: represents the rate at which an option's value decreases over time as it approaches
expiration. It measures the time decay of an option's price. For example, if an option has a theta
of -0.05, its price would decrease by $0.05 per day as time passes, all else being equal.

Vega: measures the sensitivity of an option's price to changes in implied volatility. It quantifies
the impact of changes in market expectations of future volatility on the option's value. For
example, if an option has a vega of 0.1, its price would increase by $0.10 if implied volatility
increases by 1%.

Rho: indicates the impact of changes in interest rates on an option's price. It measures the
sensitivity of the option's value to changes in the risk-free interest rate. For example, if an
option has a rho of 0.03, its price would increase by $0.03 if the risk-free interest rate increases
by 1%.

These Greeks provide valuable insights into how options prices may change in response

to different factors, helping traders and investors manage their options positions and

make informed decisions.

Now that's a lot of information to digest so let me give you an example. One of my

favorite tools to use when calculating an Option is

[Link] I feel the most important Greek is theta. This is

because the closer we are to the expiration date on the contract, the theta increases
value exponentially, draining our contract premium unless we are “In the money” (see

video). So for example, if we were bullish on TSLA, and we think it could make a $20ish

move up in the next 1-2 weeks we could buy a call option. For this example TSLA is

currently trading at $274.44 So if we purchase the $300 call expiring in 3 weeks, the cost

is 6.83 or $683. As the stock increases in trading price, our stock option will also.

However, as seen by the chart the closer to expiration the higher the stock price must

be to stay in profit. As seen below if TSLA were to make a massive gain of around 5% the

first week in our option contract, we stand to gain between $400-$250 in premium.

Now you must understand 0-day options (options expiring the same day traded).

These options often have a higher delta (meaning a greater return on movement either
up or down) and ALWAYS a higher THETA, meaning the closer it is to the closing bell at

4:00 PM EST, the greater our contract loses value.

So let's get into a 0-day expiration contract, for this example, we will use SPX. For our

example, SPX closed at 4,522.79. Now if we think the price is going down the next day,

we can purchase a same-day expiration put contract. So let's say we purchase the 4515

Put expiring the same day for $780. If SPX were to sell off heavy and hit around 4500

our 4515 put contract would be worth roughly 1.8k (depending on time to market close.

This major move would earn us around 100% return on our investment. However, if the
price goes in the opposite direction, we stand to lose a lot also since our contract cost
basis is around ~$800. This is where risk management is super important which we will
get into. Eventually, you will not need to use this calculator for intra-day trades but for
beginners, it can be a very useful tool, (ESPECIALLY for swing trades ).

Chapter 2:Understanding Candles and Price Action

Having an understanding of what a chart is showing you is one of the most

important aspects of being a successful and profitable trader. Profitable traders know
when to walk away from the market whether it's chop, or you missed your setup,
whatever it was you should know when the right time to be trading is.

Bullish Price action can be observed by price on an uptrend making higher highs, and
lower lows. The chart pictured below shows what bullish price action looks like, even
though it is not always going to look this precise. We want this steady uptrend on HIGH
Timeframes because they tend to display stronger moves. The daily and weekly
timeframes hold much more value and data than a 1 or 5-minute chart.
As traders, it is our job to understand what market conditions we are trading in and to
look for opportunities to capitalize by entering long on a swing low. If we entered into
longs at any one of these swing low points on the daily, the return on investment would
likely be very large. However, it's much easier to look back and point out these entries
than it is to trade in real-time with a live account. We can look for these swing high and
swing low points on all time frames. Wicks at these swing points are signs that the price
may reverse in the opposite direction and are usually a three-candle
Formation. The picture displayed with an arrow shows a swing
high on a 5-minute chart. Do you see the large wick Left behind?
This shows that buyers may be exhausted leaving
A possible reversal to let price continue downtrending.( In a
Bearish scenario )Can you spot the next swing high? It’s pretty
obvious, considering it looks Identical to the first one.

Bearish Price Action

Bearish Price action should look the opposite, with prices

making lower lows and higher highs. For example, look at this
chart of SPY from Jan 22 to Oct 22. (SPY DAILY)
As traders, understanding if we are bullish or bearish can help
us understand where the price is likely to go in the future. Now price often moves in this
“stair-stepping Pattern" which helps identify key levels of Liquidity for possible entries
and exits.
Now look at this picture above of SPY, it looks somewhat like the daily chart above
right? This is a screenshot from a five-minute chart showing Friday the 14th of July
price action. As you can see the market was fairly bearish throughout the whole
trading session. It's important you understand the price will more than likely not
always move in these super clean patterns shown above. Our job as traders is to
understand when to enter the market, given the circumstances that seem fit. Think of
entering a trade like walking an old wooden bridge with shark-infested waters
underneath, yes you may make it across, or you could fall in and possibly be eaten
alive. Now this is a hell of an analogy but I'm sure some of you understand. Any time we
enter a trade we are putting risk on the table.

Although trendlines are often regarded as unimportant, they are often very
useful in a higher time frame. Trendlines can be useful in combination with smart
money concepts (to be discussed). For an example of a trendline let's take a look at
NVDA, after their earnings this year they had a massive gap up, and held a very nice
uptrend on the 4-hour chart.

As you can see above, NVDA held this trend line for several weeks before
eventually breaking to the downside. Now if you had this trendline charted, you could
have shorted on the break of that trendline and it would have been a very profitable
trade. Price often respects higher time frame trends like the one shown above, but
these patterns can also be seen intra-day on a lower time frame such as the 15 or
30-minute.

Chapter 3 Psychology / Risk Management

This chapter will be extremely important for all new traders to understand.
Explaining this chapter itself is extremely difficult because it will differ from person to
person. Let's start with a definition of Psychology = The scientific study of the human
mind and its functions, especially those affecting behavior in a given context.
Reread the definition so you understand what we are talking about, I hope you
are taking notes also. In my opinion Psychology in trading can be broken down into
seven different categories.
 1. Emotions and Decision Making
2. Risk Management
3. Cognitive Biases
4. Self-control and Discipline
5. Learning and Adaptation
6. Mental Resilience
Now although some of the categories are more important than others we will start
from the beginning with #1.

#1. Emotions and Decision Making,

This aspect of trading involves EMOTIONAL aspects that we will discuss a lot in
this book. These include Fear, Greed, and Euphoria. Now all of these will affect every
person differently. For example, you may be more greedy than me, or the inverse, these
emotions are impossible to ignore and they affect every trader. Greed can be seen as
not taking profits on a trade and hence, the trade eventually turns back on you and
now instead of making money, you're looking at a loss.
Fear can be seen as hesitation to enter or exit a trade. This will especially affect a
trader after a losing streak or a market structure shift they weren't expecting ( A
bullish market turned bearish and inverse)
Euphoria I have dealt with this emotion a lot, and it is impossible to ignore.
Euphoria is huge when taking profit on a large winning trade. This euphoria may even
affect your whole day. However, the opposite applies when you take a large losing
trade, this could ruin your whole day if you're not a seasoned trader with proper risk
management (To be discussed below).
As a trader, it is our job to conquer and keep these emotions in check when you
are in a trade, all of these emotions will be running wild in your head. All of them affect
your decision-making, which is crucial to trading. If you give any of these emotions too
much slack, it will show in your trading. Now all together, this chapter is one of the
hardest aspects of trading to dial in, but once you do the rewards will be plentiful.

#2. Risk Management

It’s safe to assume that if any of you have traded at all you understand this is easily the
top 3 issues that hold people back from profitability. Either they don’t have any risk
management, or they struggle to follow through with their plans. Now Risk
management may seem like a broad term but all it means is you have a plan on when to
exit a trade if it were to go in the opposite direction. So if you are in longs (Or calls) and
the stock starts coming down, when do you exit? Of course, there is not one set answer
because each setup is different, my stop loss may be tighter than yours, or yours may
be looser than mine. Generally when trading options we want to set our stop loss at
around 20% max. Now of course this is different for futures or MT4 traders because
those don’t deal with a percentage. In other words, we want to stop out (or exit our
position), when we know we are wrong, but BEFORE it is too late to get most of our
equity invested in the position. Now what does this look like?
Well if you are in say a spy call for a cost of $100, if the contract price comes down to
$80, you may want to exit the position and analyze why the trade went red. Oftentimes
our timing may have been off, or maybe once we sell that trade for a ~$20 loss 15
minutes later the trade is up 50% or $50 (This happens many times). As traders, it is
very discouraging to take a loss on a trade that ends up being a big winner later on in
the day. However, without the proper risk management system in place, traders often
find themselves holding onto losing trades way too long.
MANY times I have seen trades blow their entire portfolio from refusing to
accept the fact that they may be wrong on a trade, whether it was wrong completely,
the timing was off, or a news release skewed price in the opposite direction. As a trader,
it is our JOB to be ready for price to do anything at any time. So how do we implement a
proper risk management system? Well like I said generally negative 20% is a
percentage you may look to exit your position for a loss. I know many traders who keep
their stop loss much tighter at around 10%.
Another important factor to risk management is taking trades with a high
risk-to-reward ratio. To calculate this [Link] has a great tool that I use often
when looking at if a trade is worth entering. Now this will vary from trading style but
generally, we want at least a 1:2 risk-to-reward ratio (known as R: R). The higher the R:
R the more likely you are to stay profitable throughout your trading career.

This chart shows that if you are taking only 4:1 R: R trades, all you need is a 30%
win rate to cover the losing trades (meaning be profitable). However, this is contingent
on the fact that you respect your stop loss, and don’t let your trade run over your
designated stop loss (determined by the R: R tool on TradingView)

#3. Cognitive Biases

Our bias is what can confluence our decision-making while trading, for
example, if you see a stock sell-off for a whole week for example. The next week you
may look to enter long because surely it cannot continue going down right? Wrong, as
traders we want to avoid thinking this way entirely. As a seasoned trader, it's
important to understand the market can do whatever it wants whenever it wants. The
market does not care about you or your position in the market. The stock market is a
machine that is propelled by algorithms (TBD). Some of the best trades will be taken
with an unbiased view of the market. The same applies in the reverse situation,
currently at the time of writing this $Meta is around $300. However, around a year ago
the stock was trading at around $90. Now granted, the entire market has turned fairly
bullish which helped lift meta up, but just because a stock has made a large move up,
doesn’t mean it cannot continue, and likewise that doesn’t mean it MUST come down. We
want to take trades based on what the price (or candles) are telling us and not from our
BIAS.
Another example could be shown if you trade with a group or even a couple of
friends. Let's say they all enter puts around the same time and the stock starts going
down. Although you probably missed the proper exit you enter anyway (chasing) and
end up losing money because you chased a move that already happened. I see new
traders do this often without the group even in a trade. They see a massive move and
join the train because there's no way it can reverse right? Wrong. Remember the stock
market does not care about you or your money. Actually, in our aspects of the stock
market, it’s a machine DESIGNED to TAKE our money. That’s why it is our job to be
meticulous with the trades we take, and don’t FOMO into trades. If you missed your
entry and you missed the move, sit it out and go back and analyze why you hesitated to
enter in the first place.

#4. Self-control and Discipline

This ties everything we discussed previously together. I promise you without
proper self-control and discipline you will never make it in the trading industry. A lot of
people are lured into traders when they see crazy gains and Lamborghinis on
Instagram. They think it's all rainbows and sunshine and easy money. Well, I hate to be
the one to break it to you but a VERY large percentage of traders lose money or give up
before they ever make it to profitability. However, with the proper trading plan,
guidance, advice, and technical analysis, it is VERY possible to find profitability within
the first year. A lot of traders' problem is they are not putting in 100% effort. They wake
up 10 minutes before the market opens, and fire off trades left and right. For example,
let's say yesterday Tesla had a nice move up of around 4$. Little Timmy wakes up the
next day and instantly buys Tesla calls hoping it goes up again, but what does he do
when it starts going down? He does nothing, he is so convinced that it will continue to
go up that he holds his position until it's worthless. He has no trading plan, no
discipline, no rules, and frankly no idea what he is doing. The moral of the story is
DON’T be like little Timmy.
All of you should create your own trading plan but personally, mine looks something
like this.
No trades within the first 15 minutes of the market open
Hard stop loss 15-30% of account size (Also realize I have the experience to
risk more)
TAKE PROFITS / SET STOP IN GREEN (secure profits in case of reversal)
NO GAMBLING
 In my experience, all of these are extremely important to follow. For example,
let's say you are in $SPY puts with a cost of .50 or $50. $SPY comes down $.60 and your
contract is now at .80 or $80. Now depending on market conditions and price action, I
would either take the profit or set my stop loss in green at .70. Meaning if $SPY were to
start coming back up, your contract would lose value and once it hits .70 it will sell it
instantly securing a $20 gain. Way too often I see traders hold too long and their
winning trades too long, and end up going red when they could have secured profits.
As traders, we do not ever want to have a gambling mentality. We use technical
analysis, smart money concepts, and high-time frame analysis to execute our trades. If
you are trading without any of these you are likely gambling but you won’t admit it to
yourself. Sit back and analyze all of your losing trades. Did you have a plan in place in
case it didn’t go your way? Did you follow the plan? Oftentimes having a plan is the easy
part, but following through with it is a different story.

5. Learning and Adaptation

The market changes every day, it is our job to adapt and understand where the
price can be drawn to on any given day. There are many ways to do this most of them
start with analysis on a high time frame. We want to use SMC (Smart money concepts)
to analyze where the price may go, and how will it get there. Going into a trading day
with a set bias can often be a recipe for failure. Now it is not wrong to analyze a
particular stock and come to the conclusion that maybe tomorrow will be another
green day. However, you should not ONLY limit yourself to trading the upside. Often
traders are so stuck up on their daily bias that they refuse to accept that they could be
wrong, resulting in a larger loss. This along with a broken trading plan (or none at all)
does not end well.

6. Mental Resilience
Regardless of what you see on Instagram, trading is NOT easy. New traders may
even find quick success and say double, or triple their initial investment. I can promise
you 9/10 times without proper guidance these new traders end up giving all that profit
back to the market. Trading can be extremely tasking mentally. It requires complex
decision-making, discipline, and an understanding of the current economic conditions
of the country, and world. For example, Timmy is in $SPY calls he went in heavy with
almost 100% of his portfolio size, Spy recently swept liquidity to the lows, and looks
good for a pushback up. However, what Timmy doesn’t know is there is a news release
in 5 minutes. Right as his position was looking good and was thinking about taking
profit, the news comes out and is extremely bearish, $SPY drops $1 within seconds. Now
Timmy's position is worth next to 0 when he could have got out with a profit. All
because he didn’t have a hard stop loss (10-20%), and didn’t even bother to check the
economic calendar for the day. Now let’s say Timmy's portfolio started with $1,000,
after the drop in $SPY he decides to get out of his calls right away. He gets out with $160
left of his initial deposit. Later on in the day, he checks the chart and $SPY is back above
the selloff and his contracts are in profit.
Timmy will likely have all kinds of emotions running through his mind. He will
be angry at himself for not having a proper stop loss, and then he will be angry at
himself for doing the right thing and exiting the position upon seeing the news
reaction. If Timmy were to hold his calls through the news release this is what we
would call “bag holding”. The contracts were likely down 70-90% but yet say he held
onto them. From experience MANY times these contracts will not come back and will
likely expire worthless. You never want to be bag-holding a position because it is very
stressful and likely you will beat yourself up for it when you could have gotten out with
some of your investment, but instead, you let it go to $0.

Chapter 4: Trading Platforms

 With all the different platforms out there to choose from you must select one
way of trading and one platform and stick to it. When it comes to options we suggest
you use Webull or TD Ameritrade. For forex, you have Metatrader 4/5. This platform
I feel is very beginner friendly and easy to understand for someone who isn't familiar
with trading apps. On the other hand for futures trading, you can use Ninjatrader,
trading view as well as Tradovate but there are many other options. Under no
circumstances do you ever want to sign up for a margin brokerage account when
trading options. If you accidentally sign up for a margin account they will require you
to keep a MINIMUM of $25,000 in the account to day trade. If you are trading with below
this balance on a margin account you will be flagged as a PDT (pattern day trader) and
likely will be margin called. Now you won’t have to worry about any of this just
double-check when signing up that it is a CASH account.
If you are looking to start trading with options, the two brokers that we
recommend are Webull, and TD Ameritrade (also known as TOS and ThinkorSwim.)
Webull is more beginner friendly and is easier to learn. However, TD has more benefits
such as buying and selling at the market price which gives you an instant fill. However
because it is a market fill, the price may change depending on how fast the price is
moving. Webull does not let you buy or sell at market because of “volatility”. On Webull
you are forced to use limit orders. So basically if you want to buy a contract let's say for
the ticker SPY, and you put in a limit order at a set price the broker will not fill you
unless the contract is at that exact price. The same goes for selling a contract, if you put
in a sell limit at 1.00 and the contract quickly drops to .90, you will not be filled and will
have to go back and adjust your limit order OR wait for the contract to come back to
your limit price.
Now many beginners do not have issues with using these limit orders but once
you become more advanced and trade volatile tickers like $SPX or $NVDA these limit
orders may be difficult to deal with. For this reason, I recommend everyone looking into
options go with TD Ameritrade. I will say the contract fees when buying and selling are
a bit higher, but they are worth it. The TOS pc software is also much superior to webull.
TOS lets you adjust your stop loss and take profit much easier than on Webull. In
addition, TOS has a great customizable grid so you can watch as many stocks as you
want at once. Included below are the two screens I watch while day trading on TOS.
TOS is amazing for quick entry and exit, as you can see in the picture above it is a
contract for the 4590 call, with a current price of 4.20 or $420. Right from the charts
you can buy and sell at the market, adjust your take profit, and stop loss, instantly.
The only drawdown is the fees are a bit higher than on Webull, and do add up.

Metatrader 4/5

If you thought about trading forex this is where you look. We will first go over
MetaTrader 4 since it was the first to release and seems simpler. When first going into
the app on your phone it may look confusing but I will run it down to simplify it for you.
You first want to create an account and connect the app to your broker. Whether you go
with a demo, live, or a funded account you need to log in. You go to settings and press
the new account and enter the details your broker sends to you. To get this setup you
must go to a forex broker(LINKED BELOW) website, enter all your legal details, and set
up an account. Now depending on what options you choose this will lead to you having
your account ready to move onto the next step and into trading. After setting it up and
getting verified(IF NEEDED)you go to settings on MetaTrader app and press the new
account and enter the details your broker sends to you. The next step would be to go
over on the bottom left to quotes and search up which ticker you will want to add to
watchlists and trade. If you choose to trade forex, indices, and crypto you can add all to
your watchlists ready to access easier to enter a trade.
FOREX BROKERS
[Link]
[Link]
[Link]

Entering a Trade
This can be the only part I feel should trick some people up. They tend to not
understand how lot sizes work and get mixed up and over-leverage. One mistake I see a
lot of traders make is using more size than they need to. In doing this, you are bound to
blow an account and worse comes to worse lose all your money on a live account. The
best thing you can do when it comes to lot size is have less rather than more, to be able
to manage your risk. Doing this allows you to ensure you know the exact amount you
are willing to lose as well as win. It's not so easy to do this and understand so I will
break it down for you and show you an easy way how to do it. The first thing you want
to do is figure out which forex pair you are choosing to trade. Depending on the one you
go with, there can be different spreads. Spread is how much the broker is making from
you for each trade. The lower the number the better. They do this by selling the ticker
you are trading for a higher price than they bought it at. The same goes for when they
buy it. After you come up with your forex pair, you want to go on a lot size calculator to
be able to manage your position and understand how much you are losing and
winning. Two lot size calculator websites I recommend(Down Below) would be,
BabyPips: [Link]
MyfxBook: [Link]
Receiving your lot size, you then want to head over to Metatrader and select the pair
you wish to trade. Enter the lot size, as well as the stop loss and take profit the websites
give you based on account size and amount wanting to be risked. After entering the
trade you should be set to either sit there or step away and let it run. You should not be
staring at your trade after entering as that leads to attachment of the money as well as
fear of the trading going wrong based on one impulsive move.

Futures

Futures are used for things like indexes, oil, gold, or other valuable items. They help
people plan for the future and protect against unexpected price changes. It's a way for
people to make deals today about buying or selling things in the future, even if the
prices change. For our trading purposes, we can use the ES and NQ the same as trading
options on SPY and QQQ, but without all of the annoying Greeks. Futures move in a
minimum size called a “tick” (.25). On the ES futures (SPY) each tick is worth $12.50. On
the NASDAQ (QQQ) each tick is worth $5.00. However, the NQ is much larger and often
moves a lot faster than ES. Now to trade these contracts on a personal account you will
usually need a margin account with at least $25,000. However, you can trade the micro
contracts with as little as $100 in a tradovate account. If interested in these futures
contracts, we recommend paper trading ES or NQ through [Link]. After
getting comfortable with the size and movement of the contract, it would be a good idea
to try a prop firm-funded account challenge

Futures prop firms play an essential role in the financial markets by providing
liquidity and contributing to price discovery. They allow talented traders to access
substantial amounts of capital that they might not have on their own, which can lead to
increased trading opportunities and potential profits. One of my favorite prop firms is
[Link] They often have MASSIVE sales between 70-90% off
accounts, so if you were looking to test out a prop firm account it’s best to wait until
they are on sale. You can purchase a $50K futures account for around $40 (USUALLY
$180). You must understand you are not trading with REAL capital, even when you pass
the account. However, if you do pass the account and hit the profit target again ($3,000
for the $50k account) you MAY be eligible for a withdrawal of $3,000. However, there
are many rules that you must read after passing the account. Some of them include 10
minimum trading days before payout, and profits NOT consisting of more than 30% in a
single trade.

In addition, because it is so easy to enter and exit trades, people often have issues
with overtrading and blowing accounts. Especially because you are only risking the
$40 spent on the account. It may sound easy to achieve a payout but with a set $2500
TRAILING DRAWDOWN, it is much harder than you think, especially with the 30% rule.
Included below is a link to the general questions and rules with APEX-funded futures
accounts.
[Link]
e-Consistency-Rules-For-PA-and-Funded-Prop-Accounts-
 Chapter 6: Smart Money Concepts

What are Smart Money Concepts?

Smart money is the capital that is being controlled by institutional investors, market
mavens, central banks, funds, and other financial professionals. Smart Money is a
collective of big forces that can move the markets. Smart-money transactions can
range from tens of millions to hundreds of millions or even billions of dollars. So why
do we use the Smart Money Concept in our trading strategies? We use SMC to follow big
money, to make money with big money. We want to catch the bank's moves, instead of
being liquidated and being on the opposite side as them.

5 main factors come with Smart Money Concepts. These are Liquidity Sweeps, Breaks of
Structure, Order Blocks, Fair Value Gaps, and Equilibrium. We don’t always use all 5 for
our trades, but we do mix and match these to take our trades, there are even times we
do use all of these confluences.

#1 Liquidity Sweeps
The first one we will be covering is Liquidity Sweeps in the market. What is Liquidity?
Liquidity is large amounts of orders that are still resting in the market that have not
been filled. These are important and it is a major key for big money-grabbing orders
and or money in the market. In trading, a liquidity sweep is the process of filling an
order by taking all available liquidity at multiple price levels within the market.
Market makers need to feel massive orders so that they can move prices to the next
target. Liquidity grabs are also large amounts of orders in which stop losses are set.
This is where the old fashion “stop loss hunt” comes from. This is major because it is our
FIRST CONFLUENCE to enter a trade, this is our first confirmation of where the price
can go.

Here we have two different liquidity sweeps as price took out the HIGHS and LOWs. BUY
SIDE LIQUIDITY and SELL SIDE LIQUIDITY are both taken out. As we see here market
makers target liquidity and orders before taking out the next liquidity. Once again this
is our first confluence for our trade.
 Once we
see a sweep of the highs or lows happens, we know large amounts of orders have been
filled. The creation of a liquidity level comes as a result of an initial imbalance of
supply/demand, which forms what we popularly know as a swing high or swing low.
These can happen in any given time frame, the bigger the time frame, the more power
it holds. Once again this is OUR FIRST CONFLUENCE on SMART MONEY CONCEPTS.
Without liquidity sweeps, there won’t be as big of moves occurring in the market. So
when we see this happen on our pair/ticker we now have an idea of what can happen.

Here is an example of Liquidity Sweeps on the forex pair/currency of EURUSD. Liquidity

sweeps are major for forex but also for indices and commodities. These happen daily on
intraday so we are always looking for sweeps. Now with our liquidity sweep, we look

for a break of structure to occur.

#2 Break of Structure

What is a break of structure? A break of structure can occur on any given time frame,
whether that is on the 5-minute chart, 1-hour chart, or even a Daily chart. It does not
matter which time frame you are on, these can all occur. Once we see a break and close
of a candle beyond the structure (swing high in an uptrend and swing low in a
downtrend) this is called a break of structure, we have broken the old structure and
created a new structure in the market. Once again, the higher the time frame, the more
power it holds. A 1HR BOS holds a lot more power than a 1M BOS. We use BOS to identify
trend reversals or trend continuations. With a break of structure, we can find AN entry
off of it. For example, if we see a break of structure on the 5-minute chart we can buy or
sell whichever direction the break happened. We can also see a break of structure on a
higher time frame such as a 1HR or 4HR, and from there we can scale down to lower
time frames and look for entries. Higher time frames give us more confluence in the
direction the market is headed. From here, we can enter our trade, manage our risk,
and set our stop loss below the breakout level. We can also get these off-order blocks
but we will get into that later. Let's look at some examples.

A BOS occurs when the price breaks above or below a key support or resistance level, or
when it forms a new high or low beyond the previous range. Here we have multiple
breaks of structures to the upside. When we see this in a live market, we can find our
entry off the break. WE ALWAYS WAIT FOR THE BREAK AND CLOSE above our
level/high/low to enter our position. If you don’t wait for the break and close above you
can easily become liquidated. We must stay patient and let the candle's body close
above our level. This is our confirmation for entry. This is a key confluence we use when
we trade indices, commodities, and forex pairs. With liquidity sweep and a break of
structure, we can enter a trade. BOS is one of the best confirmations to enter a trade, we
use them over 90% of the time when we trade whatever we are trading. BOS will make
our trade valid, of course, they are unvalidated at times and it will not always work,
but that's why we have stop losses. But now we can add order blocks, which is
ANOTHER key confluence to place an entry on a trade.

#3 Order Blocks
What is an order block?
An order block refers to specific price areas where large market participants such as
institutional traders and big banks have previously placed significant buy or sell
orders. Order blocks are an accumulation of an immense amount of orders in the
markets. The big money does not just open buy or sell orders, they distribute a single
order into order chunks to maximize their profits in the market. Why do we use order
blocks? We use order blocks so that we can follow big money and trade with them,
maximizing our profits. There are two types of order blocks that we use, these are
BULLISH order blocks, and BEARISH order blocks. When a bullish impulsive waveforms
after the break of market structure, it indicates the formation of a bullish order block.
From here, we can open buy orders with the big money in the market.

BULLISH OB

Here we have an example of a BULLISH order block. Here we can see to the left orders
were accumulated then we had a big move to the UPSIDE with a BREAK OF STRUCTURE
to the UPSIDE. Once we see this we can mark out our BULLISH order block. We will have
this marked out so that when price returns to this order block, we can enter
BUY/LONG/CALLS orders with institutions and big banks and be in the trade with
them. There were many orders placed here and market makers drove prices back up
into the order block, only picking up more orders and having prices continue. Order
blocks are a great confluence, especially on higher time frames. The higher the time
frame, the more power it holds. Here is an example of a BEARISH order block.
BEARISH OB
For this order block, it is a BEARISH order block. We see Price had a hard sell-off, a big
move to the DOWNSIDE breaking structure to the DOWNSIDE. Once we see this occur, we
can mark out the BEARISH order block. So we have it marked out for when price returns
to this order block, we can ENTER SELLS/SHORTS/PUTS orders with institutions and big
banks. Big money made the big move down, then returned price to the top of the sell-off
to fill more orders, maximize profits, and continue price to the downside. Order blocks
can happen on any time frame, 1D, 12HR, 4HR, even the 30M, 15M, and 5M time frames.
Order blocks are another great confluence to enter or look for a trade, with the addition
of a liquidity sweep and or breaks of structure. The concept of order blocks is a certain
type of approach for identifying key levels of support and resistance based on the
behavior of institutional traders. Once again, these can easily be invalidated, but that is
why we set stop losses.

#4 Fair Value Gaps

What are Fair Value Gaps?

Fair Value Gaps are imbalances in the market. An imbalance is created when the order
block creates such impulsive volume in the market that it throws off the equilibrium
between buyers and sellers, forming a gap. This is referred to as an imbalance or a Fair
Value Gap. Fair Value Gaps are found within all time frames and we could use any for
our advantage such as finding entries off of them or setting take profits off of them.
Once again, the higher the time frame the higher the power. FVGs are formed from
large moves in the market from three continuous candles which can be bullish or
bearish. Here we have our bullish and bearish examples of fair value gaps.

Once we find these within the markets we can market them out. These will happen on
all time frames such as the Daily, Hourly, 5M, etc. We have these Fair Value Gaps
marked out and we will wait for price to enter these gaps to find a trade. We can see
strong reactions from them and find a trade. If we see price come into a BULLISH FVG
(on the left side of ex.) we can look for LONGS/BUY/CALLS. If we see price come into a
BEARISH FVG (on the right side of ex.) We can look for SHORTS/SELLS/PUTS. These are
great confluences to enter a trade especially if we have had a liquidity sweep plus a
break of structure, or also a move off an order block with a break of structure. Adding
together all these confluences gives us a great reason to enter a trade within the
market whether it is a stock, index, forex, or commodities. There will be plenty of times
when Fair Value Gaps will not be respected, but that is why we are patient, wait for a
reaction, and a smaller time frame BOS before entering a trade-off with an FVG. Fair
value gaps are created from three consecutive candles which form a gap in between
them. We use these daily when we trade especially on trend days or same-day price
action. They can be bullish or bearish, here is another example:

#5 Equilibrium
What is equilibrium?
Equilibrium is achieved when the demand is equal to supply. It is almost the
halfway point of supply and demand, and it is where they meet. It is the middle, the
halfway mark, of premium and discount. The way we use Equilibrium here is simple.
Yes, it is used similar to what you see in Equilibrium in Economics, but it is different. We
use equilibrium for Fair Value Gaps, Order Blocks, and large impulsive candles. These
can be on all time frames as well. The reason we use Equilibrium is to find entries at
premium discounts. For example, once we see prices come into a 50% discount,
depending on the trend or direction, we can find entries for longs or shorts at a
discount. You can either use a FIB tool or as we use the Gann Box with only the 50%
mark on the tool.
Here we have a clear example of using equilibrium in an order block and after a break
of structure. We broke the structure to the downside and retracted into the equilibrium
premium discount. Since we broke to the downside, we are looking for
SHORTS/SELLS/PUTS. After we broke the structure we had a bigger impulsive candle.
Once we saw this we marked out our Gann box on the impulsive candle. Price came into
the discount, filled orders, and continued down. Once price came into the 50%
Equilibrium we entered short. This was a short position that we took and the price
continued to the downside. When this occurs on smaller time frames, we can find those
sniper entries we are looking for, this goes for everything, futures, options, and forex
indices/commodities. This occurs on everything such as the other confluences we have
covered.

This happens on all time frames, for both sides on the daily. When we use these on
bigger time frames such as a Daily Candle, 12HR, or 4HR. It can also give us areas of
interest to look for trades. When we see 50% discounts on higher time frames, we then
scale down to the 30M, 15M, or 5M for entries on trades.
Here we have an example of price coming into a 50% discount for shorts once
again, but it is on a higher timeframe. Notice how we broke structure to the downside,
and once price returned to the equilibrium it filled more orders and continued to the
downside. Once we see price enter this area of interest, we can scale down to smaller
time frames and find an entry for this trade.
 Chapter 7: Building a Watchlist/Indicators

What is a watchlist?
A watchlist can be a combined list of big holders or leaders in each major sector of the
stock market. It is important to understand that tickers such as AAPL, MSFT, AMZN,
and NVDA are examples of top holders and leaders in the markets. Being able to
properly analyze a select few stocks can lead to a better understanding of market
conditions/sentiment, thus it is very important to not overload yourself with
information and stocks to watch. Having a huge watchlist may seem great but that is
not the way to go, keeping only a select 3-4 stocks to help your confidence in a trade is
the way to go. Such tickers like DXY(The U.S dollar index), and VIX(Volatility Index), are
great confluences when trading the Indices such as SPY, QQQ, SPX, and NAS. We can use
VIX or DXY as inverses of the Indices such as SPY and QQQ. VIX is the volatility Index,
meaning how quickly orders are coming in and out and how many people are actively
in the market. A highly volatile market is a risky one. Understanding a Bullish VIX 📈
means the indices such as SPY would be bearish 📉. Likewise, with DXY the US dollar
index as the dollar decreases in value, our stock prices such as SPY will increase in
value. Using these 2 as opposites or inverses for extra confluence in your positions can
create a great impact on your trading awareness. Setting key levels and marking out
FVG, big support, and resistance levels for each of these stocks and keeping your
watchlist to a minimum will help your intraday analysis to take a position on the
market.
Indicators
There are many different indicators when starting, indicators like VWAP(Volume
Moving Average), MA(moving averages), and RSI(Relative Strength Index). Lots of these
indicators at some point may be useful, they can create a lot of unneeded noise in your
trading. Sticking to VWAP, and only a few other indicators is key to strictly trading
price action as it moves. Strictly using and relying on moving averages and indicators
can lead to false market reads and over-complicating your screen. Too much movement
on your trading screen can lead to confusion from raw price action.
FUTURES
 If you are trading any of the US indexes (SPY, QQQ, IWM) It is highly
recommended you watch and chart the futures ticker also. For QQQ it is NQ, and for SPY
it is ES. Even if you are not trading the futures contracts, the futures tickers provide
much more data than the options tickers because they are continuous and show us
London, and Asia sessions. Many times these highs and lows set in overnight sessions
act like levels that price often reacts to.

Chapter 8: HTF ANALYSIS

High-time frame analysis is some of the most important factors for price
analysis for any stock, index, or even forex. On your trading view, we recommend
having all of these timeframes favorited, Monthly, Weekly, Daily, 4 hours, 1 hour, 30
minutes, down to 15 and 5 minutes. These higher time frames such as the 4-hour, daily,
and weekly, help us understand where the price is drawing too. Price will always draw
to what we call PD ARRAYS (HTF OB’S AND FVGS).
 For a quick example of why these are important, we can analyze a monthly QQQ
chart.

As we can see, from 2018-2022 the market was in a strong bullish trend.
Especially from 2020-2022, the index saw some heavy moves to the upside. Then we see
a decent pullback following the covid pandemic. Currently, the QQQ index still looks
very strong. The last 7 months have printed green except for the one after the
beginning of the new trend. Now obviously the weekly and daily will show the same
pattern just with more data. This kind of analysis is what traders call TOP-DOWN.
Meaning we start with the monthly, into the weekly, daily, etc. Let's look at the
difference between the weekly and daily charts.
(WEEKLY)
(DAILY)

Now obviously, the weekly looks much cleaner, and in contrast, the daily gives
us a bit more data to analyze. Both of these are timeframes we use often to find levels of
liquidity, along with PD arrays. Looking at the weekly chart, once the price broke out of
the box I have on the chart, this would be our sign of a strong market structure shift.
Once we broke that latest swing high, the price continued drawing to our final PD
array, the ATH OB. However, this does NOT mean price will continue and make a new
ATH. At any time the market can shift to adapt to the world economic environment.
However, using these high time frames help us get an idea of where price is likely to
draw too, and why.
The 4-hour chart is one of my favorites because it can even be used intra-day.
Once you see a possible strong trend continue, you can use the 4hr, and hourly, to
watch your trade, ignoring all of the noise that the smaller timeframes provide. Here is
an example of Friday, August 18th candle print starting with 4hr, hourly, then 30
minute.

After every week you should be looking at all of these timeframes and analyzing if we
formed any new PD arrays, or tested old ones. If you are not looking at these
timeframes every week, you are missing crucial information that the market is
providing to you. One of the biggest mistakes with new trades is they don’t analyze the
HTF and strictly watch the 1 minute for day trading, take their trades, then close their
charts. If you do not have these HTF PD arrays marked out on your chart, you are at a
significant disadvantage to other traders. (This QQQ chart is cleared for the purpose of
this book)
Chapter 9: Terminology

TA = Technical Analysis
BE = Break Even
TP = Take Profits
SL = Stop Loss
LS = Liquidity Sweep
DOL = Draw on Liquidity
OB = Order Block
BOS = Break of structure
FVG = Fair Value Gap
EQ = Equilibrium
AH = After Hours
IV = Implied Volatility
ITM = IN THE MONEY
OTM = Out of the Money
ATH = All-time high
HOD = High of Day
LOD = Low of Day
RR = Risk to Reward
CHoCH = Change of Character
MSS = Market Structure Shift
IND = Inducement
IMB = Imbalance
BSL = Buy side liquidity
SSL = Sell side liquidity
POI = Point of Interest
HTF = Higher Time Frame
LTF = Lower Time Frame
NT = Notorious Trades
Power hour = Last hour in the open market
Day Trade = Buying and selling the same stock, option, or forex pair
Swing Trade = Buying and holding the same stock, option or pair for 1 or more days
Bid = The price a buyer is willing to buy the stock, option, or pair at
Ask = The price a seller is willing to sell the stock, option or pair at
Market order = Buying the stock at the available market price at the time of the order
Limit Order = An order with a specific price target that must be reached to fill
Strikes = The price the underlying needs to be above/below at expiration
Premium = Cost of the option
Expiration Date = When the options contract runs out of time, and no longer exists in the
market
Bid/Ask Spread = Difference between the bid and ask on the option contact
Implied Volatility = How much the underlying is expected to move
In the money = The underlying is above your strike (for calls) or below your strike (for puts)
Out of the money = The underlying is below your strike (for calls) or above your strike (for puts)
Monthlies = Select dates in the options chain that contain more strikes and have volume
Weeklies = Option contracts that expire within the same week of purchase
Intrinsic Value = Is the value any given option would have if it were exercised today. Only ITM
options have intrinsic value
Extrinsic Value = The value of an option due to time premium and IV. Only OTM options have
extrinsic value
Scaling Out = Securing Profits by exciting part of a position when shares/pair are higher than
entry price. An example is once hitting a PT of (10%) is it smart to exit 50% of position to secure
profits but keeping the other 50% as a free runner in hopes that the stock/pair continues to rise,
rinsing and repeating the process.
Risk Management = Proper 5-10% SL (options) and 1-3% (forex) on all trades as designation to
prevent from bag holding. (Bag holding is holding a stock that has gone against your way
significantly.)
Ticker = Other works for Stock Symbol - 1-3 Letter Symbol to represent a company trading on
the Stock Market
Bull = A bull market is a market condition where investors are expecting prices to rice (Use
bullish as a term to represent how a ticker chart appear)
Bear = A bear market is a market condition where investors are expecting prices to fall (Use
bearish as a term to represent how a ticker/chart appear)
TP = Price Target set a trader’s goal to achieve when entering a position
SL = Setting an activation price on a trade for a stock/pair to be sold if it dips to, or below that
selected price. (A way to protect your capital, a safety net to protect from moves opposite of
your trade.)
Volume = The number of shares being traded (Above-Average volume is always watched for)
Broker = An online trading platform to buy/sell trade on
Scalp = Also known as a Day-Trade (Above-Average volume is always watched for)
Short Swing = Buying a stock to hold throughout the day typically an overnight position
expecting it to increase over time
Squeeze = A squeeze occurs when a stock or other asset jumps sharply higher, forcing traders
who had bet that its price would fall to buy it in order to forestall even greater losses. Their
scramble to buy only adds to the upward pressure on the stock/pair’s price
Average Down = This is when an investor buys at the stock goes down so as to increase the price
at which purchased