Hello crypto warriors and future billionaires (amen!)! Have you heard of "Smart Money Concepts" or SMC? Don't panic if it sounds complicated. Think of it as our way of peeking into the footprints of the "big players" in the crypto market. It's like, if we are small fish, SMC helps us swim with the whales, not become their meal!
This time, we will thoroughly discuss two important concepts of SMC that are often talked about, namely Order Block and Fair Value Gap (FVG), especially when we are peeking at the price movements of Bitcoin ( $BTC ). Ready? Let's go!
What Are Smart Money Concepts (SMC)? Why is it Important?
Essentially, SMC is a method of analysis that attempts to read the "fingerprints" of large institutions, banks, or players with huge capital in the market. They are the ones with big funds to move prices. The logic is simple: if we can know where they enter or exit, we can try to ride along for profit.
Unlike classical technical analysis that focuses on standard indicators, SMC focuses more on market structure, liquidity, and areas where this "Smart Money" is likely to act. Well, the two areas that often become the focus are the Order Block and FVG.
Getting to Know the "Market Pillar": Order Block
Imagine the crypto market as a battlefield. The Order Block (OB) is like a "command post" or "last bastion" where institutions gather large buy or sell orders.
In simple terms: Order Block is the last candle (wick) with large volume that indicates accumulation (buying) or distribution (selling) by institutions, before the price moves sharply in the opposite direction.
Order Block Bullish: Usually, this is the last bearish (red) candle before the price suddenly surges upwards strongly. Institutions may engage in small sales to gather liquidity before they make large purchases. When the price returns to this Order Block area, there is often a bounce upwards because institutions still have buy orders that have not been executed.
Order Block Bearish: Conversely, this is the last bullish (green) candle before the price plummets sharply. Institutions may make small purchases to cover their shorts before they sell off massively. When the price returns to this area, there is potential for the price to drop again.
Why is it important? When the BTC price approaches a valid Order Block, this could be an interesting area to look for potential entry or exit trades, because that is where "Smart Money" has acted.
Peeking into the "Vacuum": Fair Value Gap (FVG)
If the Order Block is a command post, the FVG is like a "vacuum" or "imbalance" left by very rapid price movements.
In simpler terms: FVG is a gap of three candles where the middle candle has a wick that does not overlap with the first and third candles. This indicates a price movement that was too fast, so the market is not yet 'fair' or balanced in that area.
FVG Bullish: Occurs when there is a very rapid price surge, leaving a gap upwards. When the BTC price then corrects and fills this FVG, there is often potential for a bounce upwards.
FVG Bearish: Occurs when there is a very rapid price drop, leaving a gap downwards. When the BTC price then rebounds and fills this FVG, there is often potential for another price drop.
Why is it important? FVG often acts as a price "magnet." The market tends to want to "fill" this gap to create balance before continuing its main trend. So, FVG can be a target area for corrections or temporary reversals.
Applying it to Bitcoin (BTC) Recently: A Simple Example
Imagine you are looking at the chart:
Finding Order Blocks: For example, you see BTC drop sharply, then there is one last fairly large red candle, and after that, the price immediately skyrockets. Well, that last red candle could be your Bullish Order Block. Mark that area!
Finding FVG: When the BTC price soared earlier, you noticed a gap between three candles where there is a "vacuum" of price. That is Bullish FVG. Mark that too!
The scenario: If the BTC price then corrects and drops back to the Order Block or Bullish FVG area you have marked, this could be a signal for you to pay attention. Is there any other confirmation (e.g., Change of Character or CHoCH) that indicates a reversal? If so, this could be an interesting area to look for buying opportunities.
Similarly, the opposite applies for bearish scenarios.
Important to Know (Disclaimer!)
Not Magic: SMC is a tool, not a definite prediction. There is no strategy that is 100% accurate in the crypto market.
Needs Practice: Understanding and identifying Order Blocks and FVG requires practice and time spent observing charts.
Risk Management: Always prioritize risk management. Never invest more than you can afford to lose. Set stop losses!
Not Financial Advice: This article is for educational and entertainment purposes only. Investment decisions are in your own hands. Always DYOR (Do Your Own Research) or consult with a professional financial advisor.
Hopefully, this article helps you feel a bit more enlightened about Smart Money Concepts and how to apply them in Bitcoin's movements. Keep learning, keep progressing, and may profits always accompany you! See you in the next article!
After knowing the overview, please practice on TradingView, and trade directly on Binance.