SMT Divergence + MSS Strategy by Milana

This trading strategy combines two powerful concepts to identify high-probability market reversal points and structure shifts for precise trade entries and exits.

What the strategy does
SMT Divergence (Smart Money Technique Divergence)
The strategy compares price action between two related financial instruments (for example, the main symbol and a secondary symbol you specify). It looks for divergences between them, which often signal potential reversals:


Bullish divergence happens when the price of the main instrument makes a lower low, but the secondary instrument makes a higher low, indicating a possible upward reversal.


Bearish divergence happens when the price makes a higher high, but the secondary instrument makes a lower high, indicating a possible downward reversal.

Market Structure Shift (MSS)
After a divergence signal appears, the strategy looks for a confirmation through a shift in market structure. This means:

For a long trade, the price needs to break above the previous swing high, signaling strength.

For a short trade, the price needs to break below the previous swing low, signaling weakness.

Trade Entries
Long (Buy) Entry:
When a bullish divergence is confirmed by a shift in market structure, the strategy opens a long position.

Short (Sell) Entry:
When a bearish divergence is confirmed by a shift in market structure, the strategy opens a short position.

Risk Management: Stop Loss and Take Profit
Stop Loss is placed just beyond the recent swing point that defines the market structure shift — below the swing low for longs and above the swing high for shorts. This helps limit losses if the market moves against the trade.

Take Profit is calculated using a risk-reward ratio that you can set (default is 2:1). For example, if your stop loss is 10 points away, the take profit will be set at 20 points from the entry price, aiming to secure profits twice the size of the potential loss.

Key Parameters You Can Adjust
The secondary instrument used for divergence analysis.

The sensitivity to identify local highs and lows (pivot strength).

The risk-reward ratio for setting take profit targets.

Important Notes and Recommendations
This strategy aims to reduce false signals by requiring both divergence and a confirmed shift in market structure before entering trades.

Like any trading approach, it doesn’t guarantee profits and should be tested extensively on historical data or demo accounts.

It’s best suited for timeframes of 15 minutes and above, where price swings and divergences are more reliable.

Always use proper money management and position sizing to protect your capital.

Recommended Markets
This strategy works best on American futures markets, such as the E-mini S&P 500 (ES), Nasdaq (NQ), and Dow Jones (YM). These instruments tend to have clear structure and reliable divergences suitable for the SMT + MSS approach.