The foundation of any SMC strategy is a deep understanding of market structure. This identifies whether the market is in a trend or a potential reversal phase.
This is the first signal of a potential trend reversal. It happens when price fails to make a new high/low and instead breaks the opposite structure, indicating a shift in institutional sentiment. 2. Identifying Liquidity & Liquidity Grabs
Occurs when price continues a trend by breaking a previous higher high (in an uptrend) or lower low (in a downtrend). It confirms trend continuation. pdf smart money concept top
are specific price levels where institutional traders have previously placed large buy or sell orders, causing significant price movement.
Institutions require immense volume to fill their orders. They often "hunt" areas where retail traders place their stop-losses to create the necessary liquidity for their own positions. The foundation of any SMC strategy is a
A sudden price spike that takes out these stop-losses before reversing and moving in the intended direction. SMC traders wait for these "grabs" to occur before entering trades. 3. Order Blocks (OB) and Points of Interest (POI)
Zones where stop-losses or pending orders accumulate, such as equal highs (EQH), equal lows (EQL), or obvious trendlines. It happens when price fails to make a
Price acts like a magnet to these gaps, often returning to "fill" or rebalance them before continuing its move.
Institutions often return price to these blocks to "mitigate" or close out remaining portions of their orders. This return to the OB provides high-probability entry points for retail SMC traders. 4. Fair Value Gaps (FVG) and Imbalances
When institutions move the market aggressively, price often leaves "gaps" known as . These represent market inefficiencies where buyers or sellers were so dominant that price skipped levels.