SMT Divergence

The SMT Divergence indicator identifies potential market manipulation and smart money footprints by comparing price action between correlated instruments. It uses a multi-layered detection system to catch both frequent local Smart Money Technique (SMT) patterns and larger structural shifts across various timeframes.

Usage

The Usage section focuses on identifying non-correlations between two instruments that typically move in tandem. When one asset makes a new high or low while the correlated asset fails to do so, an "SMT" label and connecting line appear on the chart.

• Correlation Pairings: Common examples include comparing Futures vs. Spot (ES vs. SPY), related currency pairs (EURUSD vs. GBPUSD), or indices vs. their components.
• Adjacent Wick Detection: This captures immediate imbalances where the current candle's wick exceeds the previous one, but the comparison symbol does not.
• Pivot Divergence: This tracks longer-term structural divergences by comparing swing highs and swing lows.
• Intraday Trading: While functional on all timeframes, the default settings are optimized for catching intraday liquidity sweeps and reversals.

Details

The script employs a dual-logic approach to provide a comprehensive view of market divergence:

1. Adjacent-candle Wick Logic: This is a "micro" detection method. It tracks concurrent SMTs and keeps them active until the correlated price action "corrects" the divergence by breaking the stored reference level.
2. Pivot-based Logic: This "macro" method uses three distinct lookback lengths (Primary, Secondary, and Tertiary) to identify swing points. By comparing the pivot points of the main chart against requested security data from the comparison symbol, the tool highlights structural discrepancies.

Settings

Settings

• Comparison Symbol: Defines the instrument used to check for divergences.
• Adjacent Wicks: Enables or disables the detection of SMTs based on consecutive bars.
• Pivots: Enables or disables the detection of SMTs based on swing high/low points.
• Primary/Secondary/Tertiary: Adjusts the lookback periods for pivot detection to capture different market structures.

Style

• Line Color/Width/Style: Customizes the visual appearance of the lines connecting the diverging points.
• Label Size: Adjusts the size of the "SMT" labels for better visibility.

FAQ

How do I use the SMT Divergence indicator?

To use the tool, input a correlated symbol in the settings and monitor the chart for "SMT" labels, which indicate that one asset is failing to follow the price action of the other, often signaling a reversal.

What are the best pairs to compare?

Highly correlated pairs work best, such as EURUSD and GBPUSD, or the S&P 500 (ES) and the Nasdaq 100 (NQ).

How can I get access to SMT Divergence?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.