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Smart Money Concepts SMC Guide

Smart Money Concepts (SMC) is a trading methodology that emphasizes understanding institutional trading behavior through market structure, liquidity, and order blocks. It involves identifying trends, locating liquidity zones, and using price action strategies to enhance trading accuracy. By mastering SMC, traders can improve their risk management and follow institutional money movements.

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261 views2 pages

Smart Money Concepts SMC Guide

Smart Money Concepts (SMC) is a trading methodology that emphasizes understanding institutional trading behavior through market structure, liquidity, and order blocks. It involves identifying trends, locating liquidity zones, and using price action strategies to enhance trading accuracy. By mastering SMC, traders can improve their risk management and follow institutional money movements.

Uploaded by

rohedsalarzai25
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Smart Money Concepts (SMC) Trading Guide

Introduction

Smart Money Concepts (SMC) is a trading methodology that focuses on understanding institutional
trading behavior. It includes market structure, liquidity, order blocks, and price action strategies to
follow 'smart money' instead of retail traders.

1. Market Structure

Market structure helps identify trends:


- Uptrend: Higher highs (HH) and higher lows (HL)
- Downtrend: Lower highs (LH) and lower lows (LL)
- Range: Price moves sideways without a clear trend
Break of structure (BOS) signals trend continuation, while Change of Character (CHOCH) indicates
trend reversal.

2. Liquidity

Liquidity represents areas where institutional traders execute orders. Smart money targets liquidity
zones to trap retail traders before moving the price in the intended direction. Liquidity can be found
at:
- Equal highs and lows (liquidity pools)
- Stop hunts (fake breakouts)
- Imbalance areas (Fair Value Gaps - FVGs)

3. Order Blocks

Order blocks (OBs) are zones where institutions place large orders. They act as support or
resistance levels. Types:
- Bullish Order Block: Last bearish candle before price moves up
- Bearish Order Block: Last bullish candle before price moves down
Traders look for price to return to these zones for optimal entries.

4. Wyckoff Method

Wyckoff theory describes how institutions accumulate and distribute assets before major price
moves. The phases include:
- Accumulation: Smart money buys while price consolidates
- Markup: Price moves up after accumulation
- Distribution: Smart money sells before a downtrend
- Markdown: Price declines after distribution

5. Trading Strategy

Steps to trade using SMC:


1. Identify market structure (trend or range)
2. Locate liquidity zones and order blocks
3. Wait for price to enter an order block or sweep liquidity
4. Confirm entry with price action (e.g., candlestick patterns)
5. Set stop-loss below/above liquidity zones and aim for 2:1 or 3:1 reward ratio

Conclusion

Smart Money Concepts (SMC) helps traders follow institutional money by analyzing market
structure, liquidity, and order blocks. Mastering these concepts can improve trading accuracy and
risk management.

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