Smart Money Concepts (SMC) is a trading methodology focused on understanding how institutional traders (Smart Money) operate in the market.
🔑 Core Principles of Smart Money Concepts (SMC)
- Market Structure (MS)
- Identifying trends:
- Higher Highs, Higher Lows → Uptrend
- Lower Highs, Lower Lows → Downtrend
- Range-Bound → Sideways
- Helps define direction and breakout areas.
- Liquidity Zones
Areas where retail traders keep stop-losses.
Smart Money targets these zones to create fake-outs, then enters in the opposite direction.
Types:
Buy-side liquidity (above highs)2 .
Sell-side liquidity (below lows)
1 .Order Blocks (OB)
Last bullish candle before a down move, or last bearish candle before an up move.
These are zones where institutions placed large orders.
2 .Fair Value Gap (FVG)
- An imbalance in price action with no trading in between – usually identified by a 3-candle pattern.
- Market often returns to fill these gaps.
- Breaker Blocks
- Former order blocks that get invalidated and then act as support/resistance zones.
- Change of Character (CHoCH)
- The first sign of reversal in structure (e.g., break of a previous low in an uptrend).
- Signals Smart Money entering.
- Internal & External Liquidity
- Internal: Within the current structure (swing highs/lows).
- External: Outside the current structure (equal highs/lows or trendline liquidity).
✅ SMC Trading Strategy Overview
- Mark Market Structure (uptrend/downtrend)
- Identify Liquidity Pools (where stops are likely placed)
- Wait for Liquidity Grab (stop hunt)
- Look for CHoCH or Break of Structure (BOS)
- Entry near OB or FVG (low-risk zones)
- Target Next Liquidity Zone (TP)
- SL just beyond OB or liquidity wick
📈 Best Time Frames for SMC
- HTF (High Time Frame): 1H, 4H, 1D → To mark structure
- LTF (Low Time Frame): 1m, 5m, 15m → To execute entries
- Most traders use HTF for direction and LTF for sniper entries.
📌 Example Terms
| Concept | Definition |
|---|---|
| BOS (Break of Structure) | Continuation signal |
| CHoCH | Trend reversal signal |
| OB (Order Block) | Entry/Exit zone |
| FVG | Market imbalance |
| Liquidity Grab | Stop loss hunt |
🔍 Smart Money Concepts (SMC) – Advanced Insights
🧠 1. Smart Money Logic – Why SMC Works
Institutions (banks, hedge funds, etc.):
- Can’t enter with small orders; need large liquidity.
- They create traps for retail traders to build positions.
- Retail SL zones = Liquidity Pools = Smart Money Entry Points.
🏗️ 2. Core Building Blocks of SMC
🔹 A. Market Structure
- Key to understanding trend:
- Uptrend = HH & HL
- Downtrend = LH & LL
- Break = BOS (Break of Structure)
- Look for CHoCH = early sign of trend reversal.
🔹 B. Liquidity Concepts
- Equal highs/lows = targets for Smart Money
- Trendlines = often manipulated
- Liquidity Sweep = price breaks key level, then reverses
🔹 C. Order Blocks (OB)
- Candle before strong impulse
- Types:
- Bullish OB – for long entries
- Bearish OB – for short entries
- Look for entry after OB + FVG + CHoCH
🔹 D. Fair Value Gaps (FVG)
- 3-candle pattern:
- Middle candle breaks with no overlap → imbalance
- Price often returns to fill it.
- Use it as entry trigger or TP target.
🔹 E. Change of Character (CHoCH)
- Break in trend structure
- Used for reversal trades
- Strong CHoCH with OB confluence = high probability entry
🎯 3. Confluences to Increase Trade Accuracy
The more confluences, the better the trade setup.
| Confluence | Importance |
|---|---|
| OB + FVG | 🔥 Strong |
| Liquidity Grab + CHoCH | 🚨 Very strong |
| OB + FVG + HTF BOS | 🧠 Institutional level |
| Fibonacci + OB/FVG | 🎯 Precise entry |
🕒 4. Best Timeframes for SMC
| Purpose | Timeframe |
|---|---|
| Market Structure | 1H, 4H, 1D |
| Liquidity Zones | 4H, 1H |
| Entry/Refinement | 5m, 1m |
| Scalping (Intraday) | 1m, 3m, 5m |
✅ Use top-down analysis: HTF → LTF
📈 5. Sample Intraday SMC Strategy
✅ Setup: Buy Entry
- 1H Structure = Uptrend
- Price grabs Sell-side Liquidity
- Look for CHoCH on 5m
- Mark Bullish Order Block or FVG
- Enter with small SL below OB
- TP = Buy-side liquidity (next high)
❌ Setup: Sell Entry
- 1H Structure = Downtrend
- Price sweeps Buy-side Liquidity
- Watch for CHoCH → BOS down on 5m
- Mark Bearish OB / FVG
- SL above OB wick
- TP = Previous low or equal lows
📓 6. Important SMC Terms Glossary
| Term | Meaning |
|---|---|
| OB | Order Block |
| FVG | Fair Value Gap |
| BOS | Break of Structure |
| CHoCH | Change of Character |
| ITL / ETL | Internal / External Trendline Liquidity |
| RTO | Return to Origin |
| SMT | Smart Money Trap |
| EQH / EQL | Equal Highs / Equal Lows |
💡 7. SMC Pro Tips
- Always wait for CHoCH after liquidity grab.
- Avoid trading in consolidation – wait for sweep.
- Mark daily OBs and weekly highs/lows for high confluence.
- Don’t chase – let the trade come to your zone…
