Concepts

Smart Money Concepts (SMC)

A trading methodology based on understanding how financial institutions operate, identifying their footprints in price action to trade in the same direction.

Diagram: Smart Money Concepts (SMC)

What Is Smart Money Concepts

Smart Money Concepts (SMC) is a technical analysis methodology focused on understanding how institutional market participants operate: central banks, hedge funds, market makers, and large investment funds. Unlike classical technical analysis (support/resistance, indicators), SMC seeks to identify the “footprints” that institutional money leaves in price action.

Core Principles

  1. The market is manipulated: institutions move price to accumulate liquidity before making their real moves.
  2. Liquidity is the fuel: Smart Money needs opposing orders (your stop loss) to fill their positions.
  3. Structure does not lie: the sequence of BOS and CHoCH reveals the market’s true intent.
  4. Price leaves footprints: Order Blocks, FVGs, and liquidity sweeps are evidence of institutional activity.

Key SMC Concepts

  • Market Structure: the sequence of highs and lows that defines the trend.
  • Order Blocks: zones of institutional accumulation/distribution.
  • Fair Value Gaps: imbalances that price tends to fill.
  • Liquidity: stops and pending orders that institutions hunt.
  • Premium/Discount: relative value zones for identifying entries.

SMC vs ICT

SMC is a general term for institutional trading concepts. ICT (Inner Circle Trader) is the specific methodology created by Michael J. Huddleston, which includes concepts such as Killzones, OTE, Power of 3, and specific entry models. Many SMC concepts are derived from ICT teachings.