ICT SMT Divergence (Smart Money Technique Divergence) is a powerful concept introduced by Michael J. Huddleston (Inner Circle Trader) that focuses on price divergence between two correlated assets or markets to reveal the intentions of Smart Money.
It helps identify potential reversals, market traps, and true direction of price based on institutional behavior rather than retail indicators.
1. What is SMT Divergence in ICT?
SMT Divergence occurs when two correlated markets (like different indices, currency pairs, or assets) move out of sync in terms of structure or relative highs and lows.
Smart Money uses this dislocation in price behavior to trap retail traders and create liquidity grabs before reversing the market.
2. How SMT Divergence in ICT Works?
You compare the price action of two closely related instruments:
- If Market A makes a higher high, but Market B fails to do so, this suggests a bearish SMT divergence.
- If Market A makes a lower low, but Market B doesn’t, this suggests a bullish SMT divergence.
This divergence signals that one of the markets is faking the move, likely to draw in liquidity, and the true direction will go against that move.
3. Common SMT Pairings in Forex in ICT
- EUR/USD vs GBP/USD
- US Dollar Index (DXY) vs EUR/USD
- NASDAQ vs S&P 500
- Gold vs Silver
- Crude Oil vs USDCAD
4. Example 1 – Bullish SMT Divergence in ICT
Assets: EUR/USD and GBP/USD
Scenario:
- EUR/USD makes a lower low
- GBP/USD fails to make a lower low
This shows GBP/USD is holding strength, suggesting the sell-off in EUR/USD is likely a trap.
Action:
- Anticipate a bullish reversal on both pairs.
- Look for confluence with Fair Value Gaps, Order Blocks, or Market Structure Breaks before entering long.
5. Example 2 – Bearish SMT Divergence in ICT
Assets: NASDAQ and S&P 500
Scenario:
- NASDAQ makes a higher high
- S&P 500 fails to make a higher high
This shows that NASDAQ’s move could be an inducement, pulling in buyers before a reversal.
Action:
- Wait for rejection at a premium level.
- Enter short trades once there’s confirmation from Order Blocks, FVGs, or BOS.
6. Key ICT Principles for SMT
- Always pair assets that are highly correlated.
- SMT is not an entry signal by itself. It’s a bias tool to guide direction.
- Best used with:
- Liquidity sweeps
- Fair Value Gaps
- Order Blocks
- Market structure shifts
7. Benefits of Using SMT Divergence in ICT
- Reveals institutional manipulation
- Helps identify false breakouts
- Aligns with Smart Money direction
- Great tool to anticipate market reversals
- Enhances accuracy when used with other ICT tools
8. Conclusion
ICT SMT Divergence allows traders to see beyond the surface of price action by comparing correlated markets.
When used correctly, it exposes the true intentions of Smart Money, allowing you to enter the market with greater precision and confidence.
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