1000X | Are losses always swept away before they are reversed? SMC smart money (ICT) teaches you to understand the entry and exit logic of liquidity, OB, and FVG

Have you heard of Smart Money? Most people think the market is unpredictable, and any effort to control market trends is a waste. But is this really true?

SMC (Smart money concept) Trading strategies may change your opinion. This opinion is already very popular abroad, but not many people in Asia know this technical analysis method, also known as institutional order flow, which is becoming more and more popular abroad due to information and communication technology (ICT)Inner circle traders) promotion. This trading method doesn't look at any indicators; you only need to observe K-bar trends to obtain results with high win rates and profit margins. Top traders use it to predict and capture market trends.

Smart money usually refers to well-informed and experienced institutional investors, whose behavior often heralds significant changes in the market. If you can think and act like smart money, you can make money with them. In the next section, I'll introduce SMC's core concepts one by one, including key terms such as liquidity, order blocks, and FVG, and show you how to apply these concepts in trading strategies to help you better understand and utilize smart currencies in the market.

SMC trading strategy: What is a smart currency?

You've probably experienced this: when you look in one direction and set a stop loss, the market always hits your stop loss point first and then moves in the direction you initially predicted, which makes you wonder if it's being targeted by the “main force” of the market. When this happened again, some traders even chose to lower the stop-loss point, only to find that the market suddenly moved smoothly in the opposite direction. These phenomena are actually part of SMC's strategy.

Smart currency targets are usually a key price area in the market until loss points are widely set. These areas include the high or low point of the forward wave, and important support or resistance breakpoints. These critical areas are usually clustered togetherMassive trading liquidity gives SMC an opportunity to operate.

For example, if the market is expected to see a bullish trend, SMC operators may first push prices down to key support levels to attract liquidity, and not onlyA stop-loss order is triggered at this support level, while also attracting more speculative selling participation. At this point, smart money has been waiting to collect enough buy orders at lower prices to prepare for the next move. Subsequently, when the market quickly rebounds and breaks through previous highs, buy orders at the lower end of the market will be forced to stop losses, while upcoming higher buy orders provide an opportunity for smart currencies to cash out profits. If there is more liquidity, then smart money will continue to use the power of this stock to effortlessly push the market higher.

Basically, information communication technologySMC trading strategiesIt's about figuring out what smart money wants to do now, including analyzing the liquidity situation (where will retail customers stop?) , market demand (where is the price smart money wants to enter?) Wait, use these market behaviors to find the best entry points.

SMC core terms: Explanation of terms

Here are some of the most critical terms in SMC trading to help you better understand and apply this strategy.

Institutional order flow

It mainly analyzes market dynamics from the perspective of large organizations. Traditional technical analysis usually divides the market into buyers and sellers, that is, based on basic supply principles; however, in order flow analysis,The market is further segmented into smart currencies and speculative/uninformed currenciesThe two are fundamentally different in terms of market influence and behavior patterns.

Market structure

The market structure is divided into three main trends: bullish trends (prices continue to rise), bearish trends (prices continue to fall), and crossbar oscillations (prices fluctuate within a certain range).

inIn a bullish trend, each new high will be higher than the previous high, and the new low will also be higher than the previous lowThis shows the continued trend of the market. Relatively speaking,The headwind trend shows that each new low is lower than the previous low, and the new high is also lower than the previous highIt reflects the downward pressure on the market. Amid the turbulence of the crossbars, the price remains within a relatively stable range without a clear upward or downward trend.

Structural Interruption (BOS)

A breakthrough in the market structure, commonly known as BOS (structural interruption) or BMS (breaking through the market structure), refers to a structural change that occurs in the midst of an obvious trend.

In an uptrend, this breakout occurs when the price crosses the previous high, which indicatesThe trend continues; In contrast, in a downtrend, when the price breaks through the previous low, it also shows the continuation of the trend. Simply put, breaking through the market structure means that the price is moving further in the original direction.

Character changes, ChOch

The market structure changes when the price of an uptrend falls below the low of its previous band, or when the price breaks through the high of the previous band in a downtrend. It is commonly known as MSS (shift in market structure) or CHOCH (change in character), and it involves a critical change, that is, breaking the existing market structure, leading toTrend reversal.

This shift means that price action disrupts a previously determined market trend, thereby driving the trend in the opposite direction. This is an important market signal that the dominant trend may be changing, providing traders with an opportunity to reevaluate their positions.

Further reading:[SMC Advanced Tutorial] Market Structure: What are BOS and ChoCH? How to use it effectively in trading?

Liquidity pool

A liquidity pool is a price level where a large number of orders are expected to be executed in the market, usually a high or low point that cannot be broken more than once. These are usuallyAn area where large stop-loss orders are concentratedSmart currencies may use these areas for large-scale transactions.

Further reading:[SMC Advanced Tutorial] Buyer and Seller Liquidity: What are the forms? How do I find the DOL of a fluid magnet?

Order block (OB)

The order block refers to the last inverse range of the K-bar before the price rises or falls sharply. This usually includes a large number of unshipped orders. Simply put, it represents the focus of a smart currency buying or selling its warehouse cost price. Traders can use order blocks to predict possible future price support or resistance points, which is a key area for market reversals.

The principle that order blocks have a supporting or resistance effect is that since large institutions or major institutions want to conduct a large number of transactions, and exchanges often have uncompleted orders, they will hold positions at key prices similar to order blocks in order to complete transactions at a lower cost.Market prices usually return to these entry points or approach cost prices until they resume their original trend..

However, not all order blocks work, depending on what the smart currency's real purpose is. Don't see the order bar, just enter it.

Further reading:[SMC Advanced Tutorial] Order Block Principles: Find high-quality order blocks and avoid OB traps

Crusher block, BB

As mentioned earlier, not all order blocks are valid, but when an invalid order block is breached, it becomes a destructive block. Breaking through the block may cause reverse pressure in the future, as smart currencies may operate in reverse at these points to prevent the price from returning to the pre-breakout range.

The principle of breaking the block is that the real purpose of the original order block is only to obtain liquidity from the other party (trigger a stop-loss order) and allow the smart currency to enter at a more favorable price, that is, buy or sell. After gaining liquidity, smart money propels the price to move in the other direction. It caused the order block to become a destructive block.

Further reading:[SMC Advanced Tutorial] Breaking Blocks: How to Use Circuit Breaker Blocks to Seize Market Breakpoints?

Fair value gap (FVG)

Also known as fair value gaps or value gaps, they refer to areas where prices fluctuate rapidly and have not been tested. FVG should be determined by at least three K-bars. The part that doesn't overlap at all in the middle is FVG.

As prices rise rapidly, these areas are usually a collection of unfulfilled orders, and smart currencies may accumulate again when prices return to this area, so support and resistance reference areas are also important.

Also, not all FVGs work, can't see FVGs coming in. SMC's focus is also on determining the use of smart money, predicting the development direction of smart money, and using key fields such as FVG or OB to find entry opportunities.

Further reading:[SMC Advanced Tutorial] FVG knowledge to know before trading: How to find the key FVG? What is IFVG?

Implementing the SMC Strategy: ICT Transactions Act

After understanding the basics of SMC, the next focus is: How can we follow smart money to make money? How exactly did we get in and out?

To make it easier for beginners to operate, I first combinedTrend tradingHere's a simpler example of a success rate (this is my own only success rate for making money):

1. Confirm the main direction

The trick to trend trading is don't confuse the trend; if it's currently a bullish trend, the trend is more likely to continue. The picture below is a daily chart of the cryptocurrency BNX to the stablecoin USDT contract. The chart shows that the overall trend is bullish, so we should look for opportunities and take more measures to determine future growth opportunities.

2. Looking for liquidity

Let's switch to a small time scale. Below is a 1-hour K-line chart for the same trading pair. As can be seen, the price has been fluctuating for a while, and there are nearly two positions below the relative low, which means that some people have made multiple layouts on this side, which is a wise currency. A source of liquidity because once the price falls below these lows, it triggers stop-loss orders and chases short sales, giving smart currencies the chance to buy at a lower price.

3. Guess the price smart currency might be interested in

Looking at the earlier price range, you can see that there used to be an invalid order block, the partition block (BB), where smart currencies deliberately depress prices to obtain liquidity. They may not want the group to fall below BB, so BB will be a potential support point.

Additionally, at the same location, we can also find an FVG, which indicates that bullish prices are moving fast, while smart currencies may leave behind some untradable purchases, so it's also easy to find support when the price comes to FVG.

Then, looking at the current updated K-bar, we found that after declining liquidity, the price did show signs of a rebound near BB and FVG's key positions, further confirming our speculation: smart currencies may have done a lot with this layout.

4. Find entry opportunities within a short time frame

We switched to the 3-minute K-line chart. We can see that ChOch has shown a positive trend towards the bullish trend. At the same time, we have found a breakout block BB, and the price is indeed supported in this area. This is a good time for us to enter. The stop-loss point can be set below BB, and the take-profit point is usually conservative. The previous high liquidity point can be set by default.

It can be seen that the subsequent price rose very quickly, reaching our break-even point, and the yield was about 1:4.

Analysis of the advantages and disadvantages of SMC trading strategies

followsmart moneyThe sound of footsteps can achieve a higher success rate. However, like any trading strategy, SMC has its pros and cons:

SMC smart moneypros

Anticipate market trends：
SMC strategies can effectively predict market trends, enabling traders to react and trade more actively before most market participants.
Reduce market noise：
SMC strategies help traders filter out irrelevant market noise and avoid making wrong decisions due to market fluctuations.
Improve transaction efficiency：
Using an SMC strategy can increase the efficiency and effectiveness of transactions because there are precise entry and exit points, which can maximize profits and minimize losses.

SMC smart moneyshortcomings

High dependency：
The SMC strategy relies heavily on being able to correctly identify and interpret smart money behavior. Errors in a trader's analysis may result in missing important trading opportunities or losing trades.
Takes time to watch：
Since the SMC strategy relies on tracking the trends of large institutions and utilizing interest spreads, finding the best entry point also requires in-depth analysis. Compared to methods such as value investing or depositing, transactions take more time. This can be a hindrance for newbies or time-limited traders.

Using SMCTrading strategies strengthen trading mentality

The advantage of SMC's smart money strategy is that it can observe market trends in a logical manner, which helps you strengthen your trading mentality without placing orders, but it also requires traders to have a high level of analytical skills and careful management of market risk. In addition, the SMC strategy may face different difficulties in actual application, and requires more in-depth research on related concepts and more practice to improve the success rate.

[SMC Basic Teaching]What is a smart currency?

[SMC Advanced Teaching]Market structure,mobility,Order block,Destroy blocks,FVG

[SMC concept]OTE entrance,Strong MSB,False breakthroughs,dragon fruit,Daily Bias,CISD,STDV,MMXM,OHLC,FPFVG

[SMC trading system]PO3,Information and Communications Technology 2022,crammed,panacea,TGIF,unicorns,Sea turtle soup,venom

If you think you've learned how to make more or less stable profits, we recommend taking the Proprietary Trading Test abroad. By paying a small exam fee, you can use a lot of money to earn money after passing the exam and practice trading stability in the process. This model is equivalent to using someone else's money for trading operations, and is suitable for people with technology but no money. For details, please refer to:

Frequently asked questions

What is the SMC smart money strategy?

SMC (Smart Money Concept) Smart Money Strategy (ICT Trading Law) mainly focuses on tracking and analyzing the behavior of large institutions and experienced investors in the market. The strategy assumes that the actions of these market participants can predict or drive market trends, so focusing on their trades can improve the success rate.

Why is the crypto market particularly suited to SMC technical analysis indicators?

The crypto market is characterized by high volatility and transparency, open market information, and easy access to transaction records. This makes tracking the behavior of large traders and institutional investors more direct and obvious. Coupled with the immaturity of the market causing more price anomalies and loopholes, these characteristics make the SMC strategy particularly effective in the crypto market.

What are the potential risks of using SMC's investment strategies?

The main risks of using the SMC strategy include misinterpretation of information, leading to missed trading opportunities or losses; failure to respond to rapid market changes that cause the strategy to fail; and the need for large capital investments to match the operations of large institutions, which may be an obstacle for investors with less capital.

How to start applying SMC strategies to crypto market trading?

An introduction to SMC strategy should begin with an in-depth study of market structure, order flow analysis, and behavior of large organizations. It is recommended to simulate trading to familiarize yourself with the application of SMC strategies, pay close attention to market dynamics, and gradually establish sensitivity and predictability to changes in market trends.

How to evaluate the success or failure of an SMC strategy?

Assess whether the success of the SMC strategy can be achieved by comparing the trading results with the accuracy of market predictions. Regularly review the performance of the strategy, including profitability, profit and loss ratio, and transaction consistency. Furthermore, effective risk management and speed of response to strategic adjustments are important indicators of its success.

What is the discussion about ICT transactions on PTT?

On PTT's related pages, people shared a beginner's guide to ICT trading strategies, trading case studies, and answers to common trading questions. You can also see traders discussing real-life apps and some personal reviews.