We introduce Smart Money Concepts (SMC), a framework professional traders use. SMC aims to track the actions of market creators (Banks, Institutions, and Whales) and enter trades where their Order Blocks reside.
āThe core principle of SMC is that after Liquidity has been swept (cleared out), the price often returns to the areas where the Whales' actual Buy/Sell orders were initially placed.
āš§± Key Components of SMC
ā1. Liquidity Sweep (Liquidity Grab)
āWhat it means: This is the Stop-Loss Hunt we discussed on Day 23.āSignificance: This action signals that the market has gathered the necessary fuel (orders) before making a sustained directional move.
ā2. Order Block (OB)
āWhat it means: The last large candle that caused the sharp impulsive move before the Liquidity Sweep or the major trend change.āSignificance: This candle represents the zone where the Whales' remaining Buy/Sell orders (known as unfilled orders) are resting.
ā3. Fair Value Gap (FVG) / Imbalance
āWhat it means: A price gap left between three consecutive candles due to an aggressive, impulsive move.āSignificance: The market often has a tendency to return and "fill" this inefficiency or gap.
āšÆ How to Trade with SMC (Bullish Entry)
āWait for the Liquidity Sweep: Observe the price pierce below a previous Support with a long wick, clearing out Stop-Losses.āIdentify the Order Block (OB): Mark the last bearish candle (red candle) that occurred just before the market aggressively moved up from the Sweep.āWait for Entry: After the price sweeps and moves up, wait for the price to drop back to Retest the identified OB area.
āEntry/SL/TP:āEntry: Enter at the start or mid-point of the OB.āStop-Loss (SL): Place the SL just below the bottom of the OB.āTake Profit (TP): Target the previous Highs (Liquidity) that were formed before the price drop.Crucial Tip: SMC works best on Higher Timeframes (4H, 1D) and should be used to establish your Directional Bias before looking for a precise entry.āQuestion: Out of the three SMC components (Liquidity Sweep, OB, FVG), which one do you find provides the best confirmation for your trade entry? Discuss your preference in the comments!ā
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