The Oldham boss admits he is forever moaning at the 20-year-old - but only because he believes he can hit the heights.
Smalley is emerging as one of the young stars of Latics' push for promotion, and shone again in the 2-1 win over Northampton on Saturday.
But Sheridan, who guided the youngster through the ranks as a coach before he became first team manager, feels there is more to come.
"I had Deane in the youth team and the reserves, and I love him as a kid - he's a lovely lad," said Sheridan. "He knows that I believe in him, and that's all I can do.
"I will pester him, and moan at him, because that's the way I am.
"I want him to be a player, and that's the reason I do keep on at him. He definitely can be a player, but has to have belief in himself."
Smalley is first choice at the moment, but his place is under constant threat, warns Sheridan, not least from his mentor Andy Liddell.
"Deane is a big threat for us, but I will be on his case all the time, because he could play at a higher level," says Sheridan. "He has good lads around him trying to help him as well - Lids is always trying to give him good advice.
"That's the type of pro Andy is. Deano is in his place in the team, but he still tells him what to do, and I like experienced players helping the younger lads."
Smalley has made his mark as a strong-running direct wide man, but he slipped into a different role on Saturday as Sheridan toyed with his formation, playing further forward alongside Lee Hughes, with Dean Windass lying deeper to pull the strings.
Says Sheridan: "Because he is playing week in, week out, you can see a lot of confidence in his game at the moment, and he is performing well.
"Hopefully he can continue that and even improve because he has all the attributes to be a really good player."
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