SMT Divergence ICT 01 Smart Money Technique

The SMT Divergence ICT 01 Smart Money Technique indicator identifies and visualizes divergences between two positively correlated assets to help traders spot potential market reversals and trend shifts.

Usage

The Usage section describes how the script can be used to analyze market sentiment and identify high-probability entry or exit points based on ICT concepts.

Bullish SMT Divergence

A bullish divergence occurs when the primary asset forms a higher low while the correlated asset forms a lower low. This indicates that despite the weakness in the correlated market, the primary asset is being supported, signaling a potential trend reversal to the upside.

Bearish SMT Divergence

A bearish divergence occurs when the primary asset forms a lower high while the correlated asset forms a higher high. This suggests that the primary asset is failing to follow the momentum of the correlated peer, indicating exhaustion in the uptrend and a potential move to the downside.

Asset Correlation Examples

To utilize this tool effectively, it is recommended to compare assets with high historical correlations:

• Forex: EURUSD and GBPUSD
• Crypto: BTCUSD and ETHUSD
• Commodities: XAUUSD (Gold) and XAGUSD (Silver)
• Indices: S&P 500 (ES) and Nasdaq 100 (NQ)

Details

The indicator works by requesting data from a second user-defined symbol and calculating pivot points (fractals) on both instruments. When the price action of the two symbols creates opposing fractal formations (e.g., one breaks a high/low while the other does not), the script marks the divergence. The tool uses a separate pane to display the secondary asset's candles, allowing for clear visual comparison without cluttering the main price chart.

Settings

• Second Symbol: Defines the correlated asset to be used for comparison (e.g., comparing EURUSD against GBPUSD).
• Divergence Fractal Periods: Sets the number of candles required on each side to confirm a fractal high or low. Increasing this value identifies more significant, long-term divergences.
• Show SMT Divergence Line from the Bottom: Toggles the visibility of dashed lines connecting the lows of a bullish divergence.
• Show SMT Divergence Label from the Bottom: Toggles the "+SMT" label for bullish signals.
• Show SMT Divergence Line from the Top: Toggles the visibility of dashed lines connecting the highs of a bearish divergence.
• Show SMT Divergence Label from the Top: Toggles the "-SMT" label for bearish signals.

FAQ

How do I access SMT Divergence ICT 01 Smart Money Technique?

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

Which timeframe is best for SMT divergences?

SMT divergences are applicable across all timeframes, but they are most commonly used by ICT traders on the 15-minute, 5-minute, and 1-minute charts to identify "Smart Money" accumulation or distribution during London or New York sessions.

Can I use this with non-correlated assets?

While the script will function with any two symbols, the logic behind SMT (Smart Money Technique) relies specifically on the failure of positively correlated assets to move in tandem. Using uncorrelated assets will result in signals that lack technical significance.