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SMC Inducement Shift: The Pro Secret to Avoiding Fake CHoCH Traps 🚫 – Transcript
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Summary
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- The speaker explains that an inducement shift occurs when the market does not sweep an inducement and instead forms a new high, requiring the inducement to shift to the first valid pullback.
- A second inducement shift scenario happens when the market sweeps the current indicator without closing the candle and creates a new high.
- The third critical rule involves avoiding fake change of character setups when an impulse swing from low to high occurs without a pullback and acts as an inducement.
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Welcome to For Experiences. Today's topic is inducement shift. We'll also study high and low shifts. The first question that comes to mind is why study inducement shifts when we already know what inducement is, okay? And now, we can structure map using that inducement.
So, what is inducement shift? Why study it? The point is that for all the valid swing highs and swing lows formed in the market, you need to know both the inducement and the inducement shift. If the market doesn't adopt an inducement from a certain point, what will happen to that first inducement?
Will it shift or not? If it does, under what rules? And unless you have an idea of a valid swing high or swing low, you can't structure map. Therefore, for both of these things, it's crucial to have an idea of inducement shift. And unless you understand the actual structure and map it according to the real smart money concept, you can't find a valid break of structure.
Similarly, you can't find a valid change of character. Because not every break is a break of structure, and not every change is a change of character. We'll discuss an example of this in this lecture. But I'll give you a complete overview and explain the technical reasons for this in the next lecture.
Now, the point is that when we don't know the break of structure, change of character, or the actual market trend, our entry setup might be valid or not. Right? We'll only know this if we have an idea of the incentive shift, and because of this, our entry setup can be high or low risk.
Our setup could even fail, and without knowledge of the incentive shift, you'll remain stuck in this loop. You'll fall into this loop again and again. You'll repeatedly mention swing highs and lows. You'll repeatedly map the trend, breaks of structure, changes of character. But until you understand the actual adjustment shift, this loop will continue.
The only way to break this loop is to understand adjustment shifts well. Only then will you convert your trading into profits from this point forward. Now let's discuss the rules for a first adjustment shift.
The first rule before considering it is to study the definition of an adjustment shift, which I gave in the last lecture on complete adjustment. You should study that. The lecture before that is also on adjustment, because unless you understand the definition of adjustment and the basics of adjustment, you can't clearly understand the adjustment shift in your mind.
So, basically, adjustment is that the first valid pullback on the left side of any market high or low is the adjustment. Now, the first rule we've written is that if the market doesn't sweep the first indication, our indication will shift. How? This candlestick pattern. The market made a high, a low, and then a high again.
Now, based on this high, where is our indication at? At this point, again, I'll say the same thing. Those who didn't watch the first lecture should definitely watch the indication lecture to understand why this is an indication and why we marked it. Now, the forex market moved, and after moving, it didn't take this indication.
It didn't sweep it, and without sweeping, it made a new high. Now, when the market made a new high, what should we do? What should we do? The first valid pullback on the left side behind it is our indication. So, at this point, we won't consider this indication.
Our indication will shift to this pullback. Now, why is this pullback? For more information, see tomorrow's lecture. I've explained in great detail that it's essential to break the low of our highest swing candle. And the market broke the low here with a red candle, so, where will our inducement be?
It will shift from here to here. Now, this is the first rule. If the market doesn't sweep, our inducement will automatically be the first valid pullback, and all the previous inducements will remain, but their significance won't be as significant.
Now, what did the market do? The market moved down after that high, traded that inducement, and then went back. Now, it made a new high. But before making that high, see if the market closed below the inducement here.
When market candles don't close below, those who watched the first lecture know that this isn't our low, and if that's not our high low, then our inducement will shift from this point to here. Because the candle didn't close here. So, our second rule is basically that if the market sweeps the current indicator, it should sweep it but the candle doesn't close.
If the candle doesn't close and makes a new high without closing, our indicator will shift. And this swing will act as an indicator. Okay? This is how this indicator will move from here to there.
But if we look at this eye, there's also a new indicator on the left side. This is the transfer of the old indicator, which is called an indicator shift. So, this indicator is also our indicator. Now, traders wonder which indicator the market will take. Will it turn from the first point or the second point?
First, let's look at the forex chart. Here we have two indicators and what is there on the left side. There's also an order block. I'll explain this further. What is that and how the market traded? The market may take the first indicator and then turn from here.
This is the first scenario. But it's also possible that the market takes both indicators and then moves higher. How will this be confirmed? I'll explain this in detail in that lecture when we learn about entry setup techniques, how to take an entry after structure mapping, and at what point.
For now, let's look at what the forex market did. After this high, the forex market swept both indicators and created a new high. And look here, the candle closed here and closed here. When such a scenario occurs, the last indicator becomes absolutely zero for us.
It becomes of no value. This indicator moved only because it didn't sweep. It had some value. It swept here but didn't close at this point. So the indicator shifted from here to here. Now, the candle closed both below and above. Okay, on both sides.
So, the next question is, why did the market take both indicators? As I mentioned earlier, I'll explain the entry techniques in full detail. For now, I'll just give you an overview. See, there wasn't a specific buying area below this indication.
Smart money, being smart money traders, trade order blocks, or supply and demand, and that too, areas that are fresh and where smart money has yet to tap into. So, if we look at this point, what's there? This is a liquidity gap, or the price has left an imbalance.
I'm just saying this is just an overview. Traders with prior experience and knowledge of these things will have an idea of why the price took both indications. This is because there was a liquidity gap below the price. There was an imbalance. I'll explain this in full detail later. Also, there was an order block here.
The bearish candle that precedes a bullish move is called an order block. This was a bullish order block. Okay, so, what did the market do? The liquidity gap filled, the order block was tapped, and the market returned to its original direction. It moved in the direction of the trend. Now, why did the liquidity gap fill the market?
I'll give you a one-line introduction. It basically means that price always balances itself. If the market has made a one-sided move at any point, as it did at this point, and not to the sell side, there's a 70% chance the market will fill it.
At least a 50% chance is inevitable. We'll discuss these things later when we study entry techniques. Our point right now was how an incentive shift occurs. We saw the first shift here. We saw the second shift here.
Now, what's the third rule? This third rule is very important. The first two rules are very simple. The third rule is extremely important and extremely critical. Because most smart money traders fail at this point. But before I mention the third rule, I'll give you a real-life example.
What happened to gold a week ago? We'll look at a gold chart. I didn't mention it above, but I'll show you when you open a trading view chart. Okay, go to M15 and you'll find this chart of gold. It's from three to four days ago. This is the market's trading.
This is basically a gold chart. The M15 timeframe would be from last week's Monday or Tuesday. Hopefully, what did the market do here? It made a high, then a low. It made this low, then the price broke this high. The price went up.