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SMC 101

Smart Money Concepts (SMC) is a trading strategy that focuses on market structure, liquidity, and price action, emphasizing the behavior of institutional traders. Key concepts include market structure analysis, liquidity zones, order blocks, and fair value gaps, which help traders identify optimal entry points. The guide also outlines a simple trading setup to capitalize on liquidity sweeps and price movements during key trading sessions.

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361 views2 pages

SMC 101

Smart Money Concepts (SMC) is a trading strategy that focuses on market structure, liquidity, and price action, emphasizing the behavior of institutional traders. Key concepts include market structure analysis, liquidity zones, order blocks, and fair value gaps, which help traders identify optimal entry points. The guide also outlines a simple trading setup to capitalize on liquidity sweeps and price movements during key trading sessions.

Uploaded by

thusoseitebatsoemmanuel
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We take content rights seriously. If you suspect this is your content, claim it here.
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📘 Smart Money Concepts (SMC) 101 — Beginner's Guide

Smart Money Concepts (SMC) is a trading strategy based on how institutional traders
(banks, hedge funds, etc.) move the market. It focuses on market structure, liquidity, and
price action — not indicators.

🔑 CORE CONCEPTS OF SMC:


1. Market Structure

●​ Higher Highs / Higher Lows (Uptrend)


●​ Lower Highs / Lower Lows (Downtrend)
●​ Break of Structure (BOS): Sign of trend continuation
●​ Change of Character (CHOCH): Sign of trend reversal

2. Liquidity

●​ Institutions hunt liquidity to enter or exit trades.


●​ Common liquidity zones:
○​ Equal highs/lows
○​ Trendline liquidity
○​ Buy/Sell stop clusters
●​ Liquidity sweep = Fakeout before real move (stop hunt)

3. Order Blocks (OBs)

●​ The last bullish/bearish candle before a strong move.


●​ Seen as institutional footprints.
●​ Price often returns to these zones for re-entry or mitigation.

4. Fair Value Gaps (FVGs)

●​ Price inefficiencies: gaps between candles due to imbalance.


●​ Price tends to return and fill the gap.
●​ Good entry zones if aligned with structure and liquidity.

5. Mitigation Blocks
●​ Previous order blocks that price returns to, where unfilled orders may be executed.
●​ Often used after a BOS or CHOCH.

6. Breakers

●​ Failed order blocks that are broken and then retested.


●​ Useful in identifying traps and invalidation points.

7. Kill Zones (Optimal Trading Sessions)

●​ Focus on:
○​ London Kill Zone (2 AM – 5 AM EST)
○​ New York Kill Zone (7 AM – 10 AM EST)
●​ These times are when major moves and liquidity grabs often happen.

8. The Power of 3

●​ Accumulation (sideways movement)


●​ Manipulation (stop hunt or fake move)
●​ Distribution (true directional move)

✅ Simple SMC Trading Setup:


1.​ Identify liquidity pool above/below highs or lows.
2.​ Wait for a liquidity sweep and CHOCH.
3.​ Look for FVG or OB on lower timeframes.
4.​ Enter trade at FVG/OB with SL just outside the sweep.
5.​ Target next liquidity zone or BOS point.

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