Smart Money Concepts (SMC)

SMC is the modern framework for understanding how institutional traders move markets. It builds on Wyckoff and ICT (Inner Circle Trader) concepts.

Order Blocks (OB)

An order block is the last opposing candle before an impulsive move. It represents the price level where institutions placed their orders.

• Bullish OB: Last bearish candle before a strong bullish impulse
• Bearish OB: Last bullish candle before a strong bearish impulse

Price tends to return to these levels before continuing in the impulsive direction. They act like refined supply/demand zones.

Fair Value Gaps (FVG)

An FVG is a three-candle imbalance where the wicks of candle 1 and candle 3 don't overlap, leaving a gap in the middle candle.

• FVGs represent areas where price moved too fast and left "unfilled" orders
• Price often returns to fill these gaps before continuing
• FVGs act as magnets — price is attracted to them

Liquidity

The most important SMC concept: price gravitates toward liquidity.

• Buy-side liquidity (BSL): Stop losses above equal highs. Institutions need to sweep these to fill large buy orders.
• Sell-side liquidity (SSL): Stop losses below equal lows. Institutions sweep these for sell orders.
• Liquidity sweeps: When price takes out obvious stops before reversing. This is the "stop hunt."

The SMC Trading Model

1. Identify the higher timeframe bias (structure)
2. Look for liquidity to be swept (equal highs/lows, trendline liquidity)
3. Wait for price to enter an order block or FVG
4. Take the trade with a tight stop behind the OB
5. Target the opposing liquidity pool

Key Takeaway

SMC gives you a framework for understanding why price moves where it moves — it's following institutional order flow, not retail patterns.