Optimal trade entry (OTE)
Fine-tuning your entry price inside the discount or premium zone.
The optimal trade entry (OTE) refines the premium and discount logic by defining the optimal entry zone for a trade, based on Fibonacci retracement levels (the fibs).
The principle
After an impulsive move, price retraces. The OTE identifies the zone where a resumption of the initial move is most likely: typically between the 0.62 and 0.79 Fibonacci levels, with 0.705 as the sweet spot.
To draw the fibs, click first on the swing high or low that started the premium and discount range, then on the swing high or low that ends it (not the other way around).
Why these levels
There is no Fibonacci magic here: these levels are an observational convention that marks a deep retracement, nothing more. What makes the zone tradable is what happens there: the smart money accumulates or distributes before relaunching the move. Depending on the direction, it is a discount zone (longs) or a premium zone (shorts), used to:
- rebalance: fill an FVG or mitigate an OB left open;
- grab liquidity: clean out orders before moving on.
Incidentally, this is where the dumb money panics, believing in a full reversal.
In practice
- 1Identify a clear range bounded by swing highs and lows.
- 2Draw your fibs between those two points.
- 3Wait for price to come back into the 0.62 - 0.79 zone.
- 4Look for an entry trigger inside that zone: FVG, OB, rejection, etc.
- 5Place your stop loss beyond the swing point, and your target at the next liquidity level.
The OTE is never used on its own. Its power explodes when it lines up with an FVG, OB or BB sitting right inside the 62-79% zone, combined with an SMT divergence (the subject of the book). It is a precision tool, not a standalone entry signal.
Use fibs in your trading. They will stop you from chasing price and help you find the optimal zone to open a trade from. Never use them on their own.
The rest is in the book
Beat the Market with SMT Divergences
These pages are the first part of the book. The rest answers the two questions that matter: which pair to trade, and when to enter.