What is SMC (Smart Money Concept)?
Smart Money Concept, or SMC, is a trading technique used by large traders such as financial institutions, banks, or various funds that play a significant role in the currency exchange market. These large traders have massive investment amounts, which impact market movements. This concept was developed to predict the future direction of the market based on the trading activities of these large traders.
Market Structure
The SMC technique used is Market Structure to observe the overall major trend by looking at market behaviors such as BoS and CHoCH. Observe the price chart to determine which trend is currently in place based on the BoS behavior of that trend. If that trend breaks structure or a CHoCH occurs, it can be concluded that the trend is about to reverse into a new trend.
In normal profit-taking, traders wait for the price to rise to the point where the chart previously made a CHoCH and then enter orders according to the new trend that is about to emerge. However, trading with SMC to find precise entry points requires considering various factors that will occur to enter orders and achieve the shortest SL.
When the price chart shows a CHoCH, zoom down to a lower timeframe (Minor) to see what behavior is happening in the market.
Demand & Supply Zone
In the example graph that I encountered, a Supply Zone (DBD) formed, and then the graph moved up to touch the Supply Zone before reversing down again. This can confirm that the price might reverse according to the larger trend where a CHoCH occurred.
Entering Orders and Setting the Shortest SL Using SMC (Smart Money Concept)
Once the price chart confirms a reversal in the Minor timeframe, traders can place orders at the point where the chart touches the Supply Zone again. The shortest SL can be set just above the boundary of the Supply Zone.
The price graph behavior encountered in the Minor can take various forms. There may be occurrences of FVG, Order Block, or Liquidity Grab, which can also be used to find entry points for orders.
The trading techniques of the SMC concept are diverse and not very well-known among novice traders, as they require understanding many principles and are quite complex. However, once you grasp this concept, you will be able to profit more easily by following in the footsteps of major traders.
