SMC - Smart Money Concept
Smart Money Concept (SMC) is an advanced methodology in market analysis based on understanding how institutional money moves, through reading price action and market structure, rather than relying on traditional indicators.
What SMC strategy focuses on:
1. Market Structure: Determine the overall trend (bullish, bearish, or sideways).
2. Order Blocks (OB): Areas where institutions enter with large orders.
3. Liquidity Zones ($$$): Points targeted by institutions to gather liquidity.
4. Fair Value Gaps (FVG): Price gaps that provide trading opportunities.
5. Market Manipulation: False moves to deceive retail traders.
Key Concepts in SMC:
1. Market Structure
Bullish trend: Higher highs & Higher Lows.
Bearish trend: Lower highs & Lower Lows.
Break of Structure (BOS): Breaking a major high or low indicating trend continuation.
Change of Character (CHoCH): A break indicating the start of a trend reversal.
2. Order Blocks (OB)
Areas where institutional investors execute large orders leading to strong price movements.
Bullish block: Before a strong bullish candle. Considered a buying area on retest.
3. Liquidity Zones ($$$)
Points where a large number of pending buy orders or stop losses are clustered.
Often found above highs or below lows.
Targeted by institutions to gather liquidity.
4. Fair Value Gaps (FVG)
Result from strong price movements without overlapping with neighboring candles.
Price often returns to fill these gaps, providing entry opportunities.
5. Price Manipulation
Institutions may create false moves like fake breakouts to gather liquidity from stop-loss orders.
Steps to Implement the SMC Strategy
Step 1: Identify the overall trend
Timeframe: For example, 4 hours.
Analyze highs and lows to determine if the trend is bullish or bearish.
Step 2: Look for Order Blocks (OB)
Look for strong candles followed by large price movements.
Wait for a retest of the area to enter.
Step 3: Targeting Liquidity Zones
Identify higher highs or lower lows.
Expect the price to move toward it.
Step 4: Use FVG as potential entry points
On smaller timeframes (15 minutes - 1 hour), look for gaps.
Wait for the price to return to fill them.
Step 5: Risk Management
Do not risk more than 1-2% of capital on a trade.
Risk to Reward Ratio: At least 1:2.
Place the stop loss below the order block or below the price gap.
Tips for effectively applying SMC:
Continuous training: Use a demo account to understand price action and identify OB and FVG.
Diversifying Timeframes: Identify the trend in the larger frame, and pinpoint entries in the smaller one.
Patience and discipline: Only enter after strong confirmations appear.
Ignore the noise: Do not let news or rumors affect your decisions.
Summary
The SMC strategy provides a professional way to understand market movements based on the actions of large investors. By understanding market structure, order blocks, and fair value gaps, you can improve your entry points and achieve better results.
Start training, control your risks, and stay disciplined for sustainable success.
