Comprehensive Guide to Smart Money Concept (SMC) for Crypto, Forex, and G

1. Introduction to Smart Money Concept (SMC)

The Smart Money Concept (SMC) refers to a trading strategy used by institutional traders, banks,

and hedge funds. The strategy is based on understanding and tracking the movement of 'smart

money,' which influences the market's direction. In this guide, we apply the SMC methodology

across three major trading markets: Crypto (Bitcoin), Forex (EUR/USD, GBP/USD), and Gold

(XAU/USD).

Key Concepts:

- **Liquidity Sweep**: When price moves to grab liquidity (stop losses, orders) before reversing.

- **Mitigation Block (Order Block)**: The last bullish or bearish candle before a significant move.

- **Break of Structure (BOS)**: A change in market structure indicating a possible trend shift.

- **Change of Character (CHoCH)**: A sign that market conditions are changing from bullish to

bearish or vice versa.

- **Fair Value Gap (FVG)**: Price imbalance where the market may return to fill before continuing

the trend.

2. Market Analysis for Each Pair

Crypto - Bitcoin (BTC/USD)

In the crypto market, Bitcoin is a highly liquid asset but is also subject to extreme volatility, which

makes it suitable for the SMC strategy. The key steps in trading Bitcoin using SMC are:

1. **Identify Liquidity Pools**: Find areas where stops are likely placed (recent highs/lows).

2. **Liquidity Sweep**: Wait for price to sweep liquidity above/below these levels.
3. **CHoCH**: Identify a break of structure or a change of character signaling a potential trend

reversal.

4. **Mitigation Block**: Look for the order block before the significant move for a potential entry

point.

5. **Entry**: Enter near the mitigation block or FVG zone.

6. **Exit**: Place a stop-loss just beyond the order block and take profit at the next liquidity zone.

Real-World Example:

- BTC/USD was swept above $30,000 before reversing. A BOS indicated the start of a downtrend.

The entry was taken at $29,500 in the mitigation block. The exit target was $28,000.

Forex - EUR/USD

EUR/USD is a highly traded currency pair, making it a prime candidate for SMC strategies. Here's

how to apply SMC on EUR/USD:

1. **Identify Range Liquidity**: Find internal and external liquidity levels.

2. **Liquidity Sweep**: Watch for price action sweeping external liquidity before reversing.

3. **CHoCH**: A shift in market structure after liquidity sweep, signaling trend change.

4. **Mitigation Block**: A key bullish/bearish candle before the trend change.

5. **Entry**: Enter near the order block.

6. **Exit**: Exit at the next liquidity zone (or next significant price level).

Real-World Example:

- EUR/USD swept a recent low before making a bullish CHoCH on the 1H chart. The mitigation

block entry was at 1.1150, with a target of 1.1200.

Gold - XAU/USD
Gold (XAU/USD) has a distinct market structure compared to other assets due to its safe-haven

status. Using SMC, you can trade gold by:

1. **Liquidity Sweep**: Look for price action that sweeps above or below important levels.

2. **CHoCH**: Identify a clear change in market character.

3. **Mitigation Block**: Find the last bullish or bearish candle before the trend reversal.

4. **Entry**: Enter near the mitigation block.

5. **Exit**: Place targets at next key liquidity zones.

Real-World Example:

- XAU/USD saw a sweep above $1,800, followed by a clear bearish CHoCH. The entry was placed

at $1,780 at the mitigation block, with a target at $1,750.

3. Entry and Exit Strategy

To effectively trade using the SMC method, follow these rules:

1. **Entry**:

- Wait for liquidity to be swept.

- After liquidity sweep, ensure a clear Change of Character (CHoCH).

- Identify and wait for the price to reach the Mitigation Block.

- Enter near the open of the order block or 50% retracement.

2. **Exit**:

- Exit at the next liquidity pool or imbalance zone.

- Place your stop loss just beyond the order block.

- Follow the market structure (don't exit prematurely unless market conditions change).
4. Risk Management

Proper risk management is critical when trading with SMC. Follow these key steps:

- **Position Sizing**: Risk no more than 1-2% per trade.

- **Stop-Loss**: Always place your stop-loss just beyond the Mitigation Block.

- **Take Profit**: Set take-profit at the next major liquidity zone or key level.

5. Conclusion

The SMC strategy provides a structured approach to trading that aligns with institutional market

behavior. By focusing on liquidity sweeps, market structure, and key order blocks, traders can

position themselves with the "smart money." Always ensure risk management is part of your

strategy for sustainable success.

We hope this guide will provide you with the tools and insights to effectively implement SMC in your

trading.