Smart Money Concepts (SMC) course is an introduction to understanding the principles and strategies associated with SMC, designed for beginners and covering the basics before moving onto advanced strategies. The goal of the course is to help traders understand SMC, enabling them to plan entries, stop losses, and targets for high reward-to-risk ratios, and it is influenced by Robert WiKoff's vikov theory, which assumes that the market is manipulated by a small group of traders, known as smart money.
The course provides a comprehensive basic understanding of how to follow the footprint of institutions, also known as Smart Money, and teaches how SMC positions itself and how SMC finds liquidity. It is designed to transform losing traders into profitable traders by teaching them about Smart Money Concepts, an advanced trading strategy that combines Key level strategy and Traditional Supply Demand with Market structure to optimize win rate, reward per risk ration, and help traders control their emotions better.
1.Understanding Smart Money Concepts
Smart Money Concepts (SMC) is a trading strategy that advises retail traders to construct their strategies around the activities of market makers, such as banks and hedge funds, focusing on variables like supply, demand dynamics, and the structural aspects of the market. By aligning their approach with the sophisticated techniques of prominent market figures, SMC traders aim to capitalize on market movements driven by smart money.
Key terms in SMC include:
Order blocks: Concentrated areas of limit orders awaiting execution, identified on a chart by analyzing past price movements for significant shifts.
Fair value gap: Represents an imbalance in the market, indicating a potential trading opportunity.
Liquidity: Pertains to price levels where orders accumulate, rendering an asset class "liquid".
Break of structure (BOS): Occurs when the price surpasses the previous high, signaling a change in the market's behavior.
Change of character (ChoCH): Indicates a potential change in the market's character when the price drops below previously established lows.
SMC is derived from Wyckoff's Theory, introduced by Richard D. Wyckoff, which aims to reveal the intentions of "smart money" in the market through price and volume analysis. The Wyckoff Price Cycle consists of four main phases: accumulation, markup, distribution, and markdown. Smart money refers to capital placed in the market by institutional investors, market mavens, central banks, funds, and other financial professionals who often conduct in-depth fundamental analysis, including analyzing financial statements, management teams, and market trends.
SMC is not a standalone strategy but a theory or philosophy that requires understanding market structure, supply and demand, and price patterns. The strategy is applicable to various markets, including DERIV SYNTHETICS INDICES, forex, cryptocurrency, commodities, and futures. Trading with the trend and breaking the trend are two main strategies in SMC, which is based on market structure, market cycle, and multiple timeframe theory. The strategy helps traders understand the market's overall movement and identify where to enter trades with low risk.
2.Identifying Key Market Structures:
Market structure is a fundamental concept that guides understanding of upward, downward, and sideways trends in various markets, acting as a guide for understanding price movement and identifying trading opportunities. It highlights support and resistance levels, swing highs, and swing lows, illustrating who is in control and identifying trends.
Key components of market structure include:
- Higher highs and higher lows: Indicative of an uptrend.
- Lower highs and lower lows: Indicative of a downtrend.
- Support: A price level that can halt a downtrend due to a concentration of demand or buying interest.
- Resistance: A price level that repels an uptrend due to the emergence of an increased number of sellers.
Market structure analysis is distinct from price action analysis, offering a unique perspective on the market . It is crucial for improved risk management and developing a real edge in the markets, and can be applied to any market, including Forex, futures, and stocks.
Additional key market structures in Smart Money Concepts (SMC) include:
- Order Blocks (OB): Market conditions where central banks, governments, and large financial institutions accumulate or distribute large quantities of an asset through several big orders.
- Breaker Blocks: Order blocks that fail to hold the price level in a given trend, representing price levels where market makers intentionally break through support or resistance levels to trigger stop-loss orders from retail traders.
- Fair Value Gaps (FVG): Gaps on price charts that occur when the market moves quickly from one price level to another, indicating significant shifts in market sentiment.
- Break of Structure (BOS): Shifts in the market's overall trend, identified when the price sets a new high or a new low while breaking the former ones.
- Change of Character (Choch): Abrupt shifts in market behavior, indicating a weakness in the current trend and a possible reversal.
- Liquidity: A point in the price of an asset where orders are either sitting above or below, waiting to be collected.
3.Application of Fibonacci and Discounted Zones:
The Fibonacci retracement tool is a valuable asset in Forex trading, used to identify premium and discount zones (PD zones). In a bullish trend, the discounted zone lies below the 50 level, while the premium zone is above it. Conversely, in a bearish trend, the discounted zone is above the 50 level, and the premium zone is below .
PD zones offer several benefits, including:
- Formulating setups in trend continuation markets
- Filtering out low probability trade setups
- Improving risk to reward ratio
These zones are most effective on higher time frames, such as daily, H4, and H1 . To locate PD zones, traders use the Fibonacci retracement tool to measure the magnitude of retracement or pullback against the expansion. The 50% level serves as the equilibrium point, where there is no premium or discount.
Traders can utilize PD zones to catch trend continuation by waiting for the price to enter the discounted zone before executing a trade . Additionally, they can look for order blocks, fair value gaps, or demand and supply zones within the discounted area when the price revisits this zone.
The Fibonacci retracement levels are drawn between the high and low of an uptrend, with the following key levels:
0% level: High of the trend
38.2% to 0% levels: Premium area
50% level: Equilibrium
68.1% to 100% levels: Discount area
The strategy involves buying from the discount area and selling from the premium area to secure the best possible price . While the Fibonacci tool can also be used for setting targets, its primary use is to identify the creation of new demand or supply zones. The highest probability is for price to enter the premium or discount area for buying or selling.
Fibonacci retracements are crucial for identifying key levels of support and resistance in the forex market. They are calculated after a market has made a significant move either up or down and appears to have stabilized at a specific price level. The key Fibonacci retracement levels are 38.2%, 50%, and 61.8%, which are considered especially important when a market has approached or reached a major price support or resistance level. The 50% level, although not part of the Fibonacci number sequence, is included due to the widespread trading experience of a market retracing about half a major move before resuming its trend.
4.The Complete Smart Money Concepts Guide is a comprehensive resource that includes:
8 strategies used by top smart money players, understanding of levels of liquidity sweeps for trading, mastery of order blocks, Break of Structure, Change of Character, Fair Value Gaps, Equilibrium, and daily bias determination, and knowledge of the Daily MATI SMC strategy:
Putting It All Together: Real Chart Examples
The Smart Money Concepts course is structured in depth, covering definitions, main strategy, and extra knowledge. The main strategy includes trading follow trend and trading break trend, with theory and examples provided . Traders should follow a top-down approach, starting analysis from higher time frames to identify larger market trends. The course covers SMC techniques for various trading styles, including swing, intraday, and BTSD trading.
To apply SMC in real trading scenarios, consider the following examples:
Best Learning Video : Smart Money concepts
2. Mark the recent break of structure (BOS).
3. Mark the supply or demand zone that caused recent break of structure.
4. Identify imbalances or liquidity zones.
5. Wait for the price to return to the Orderblock block: Supply or Demand Zone.
6. Mark CHOCH
7. Mark lower timeframe demand and supply zones, enter a trade and target higher timeframe highs and lows.
The above strategy was tested with this Broker.
Applying Smart Money Concepts requires a disciplined approach, utilizing multiple time frames and carefully analyzing market conditions. While the strategies covered in the course are powerful tools, it is essential for traders to practice and gain experience in real market scenarios to fully grasp and implement these concepts effectively. With dedication and proper application of Smart Money Concepts, traders can enhance their skills and work towards achieving their financial goals in the dynamic world of trading.
5.FAQs
Q: Can trading with Smart Money Concepts lead to profitable trades?
- A: While Smart Money Concepts (SMC) involve strategies used by institutional investors, which can be successful, they do not guarantee profitable trades. Traders should be cautious and make sure to perform their own analysis before making investment decisions.
Q: Is Smart Money Concepts the most effective trading strategy available?
- A: Smart Money Concepts incorporate some of the most effective and long-standing techniques to provide valuable market insights. Retail traders have been utilizing price action technical analysis for many years. Despite the specific terminology used in SMC, it essentially aligns with these traditional approaches.
Q: What are the steps to becoming proficient in Smart Money Concepts?
- A: To become proficient in Smart Money Concepts, one should engage in comprehensive study of the strategy, including its unique terminology. Mastery also involves hands-on practice with analyzing supply and demand, order flow trading, and price patterns within actual market conditions.
Q: Does Smart Money Concepts offer a better approach than price action trading?
- A: The effectiveness of Smart Money Concepts versus price action trading can vary from trader to trader. Some may find the integration of social media sentiment in SMC more beneficial, while others may favor the price action strategy for its focus on technical analysis and historical price data. It's possible to integrate both methods to enhance trading performance.
References
[1] -https://www.tradeforexcrypto.com/2024/05/unlocking-forex-success-essential.html?m=1[2] - https://www.youtube.com/watch?v=iMgIMLPjYkk
[3] - https://www.youtube.com/watch?v=nS_aQLQ-MBQ
[4 - https://www.youtube.com/playlist?list=PLpr-37gQCeUejohifzJEwthI-eXhd1UJG
[5 - https://www.udemy.com/course/a-complete-advanced-supply-and-demand-course-smc/
[6] - https://www.classcentral.com/course/udemy-advanced-trading-course-complete-smart-mone-121839
Disclosure: Any information presented on this website does not represent investment advice.
Risk Warning: Investing involves high risks, including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.
You should consider whether you can afford to take the high risk of losing your money. Before deciding to trade you should be fully informed of the risks and costs associated with investing with the financial markets. The data contained in this website is not necessarily real-time nor accurate. TRADEFOREXCRYPTO.COM and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your investment, or your reliance on the information contained within this website.
TRADEFOREXCRYPTO.COM may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Comments
Post a Comment