SMC Probability

SMC Probability - is an indicator designed to track the actions of institutional investors, commonly known as “smart money”. This tool calculates the probability that smart money will actively participate in buying or selling in the market, which is referred to as smart money order flow.

The indicator measures the probability of three key events: Change of Character ( CHoCH ), Shift in Market Structure ( SMS ), and Break of Structure ( BMS ).  These probabilities are displayed as percentages alongside their respective levels, providing a straightforward and immediate understanding of the likelihood of smart money order flow.

Finally, the back tested results are shown in a table, which gives traders an understanding of the historical performance of the current order flow direction.

• Calculations

The algorithm individually computes the likelihood of the events ( CHoCH ,  SMS , and  BMS ).  A positive score is assigned for events where the price successfully breaks through the level with the highest probability, and a negative score when the price fails to do so.  By doing so, the algorithm determines the probability of each event occurring and calculates the total profitability derived from all the events.

• Example

In this case, we have a 72 percent probability that price will break the lower range and make a new structure breakout, and only a 27 percent probability that price will break the upper range and make a character change.

• How to use

This indicator is a perfect tool for anyone that wants to understand the probability of a Change of Character ( CHoCH ), Shift in Market Structure ( SMS ), and Break of Structure ( BMS )
The insights provided by this tool help traders gain an understanding of the smart money order flow direction, which can be used to determine the market trend.

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