The Truth About Smart Money Concepts (SMC) Trading Strategy

Reference :
* https://www.tradingview.com/script/3R6Os4D0-Smart-Money-Concepts-DaviddTech/

Smart Money Concepts (SMC) by Inner Circle Trader (ICT) is a popular trading strategy that has been making waves in the trading community. The strategy is based on the idea that “smart money” constantly manipulates the market to run stops of retail traders and engineer liquidity. While there is a lot of hype around SMC, it is important to delve into the reality of this strategy and discuss its realistic expectations.

To help traders implement this strategy, I have coded an indicator called Smart Money Concepts (SMC) Indicator. This indicator simplifies the process of identifying key levels such as Liquidity and Orderflow, Order blocks / Supply and Demand Blocks, Fair value gaps, Market structure, Timeframes, and more. With the SMC Indicator, traders can easily spot these key levels and make better trading decisions based on them.

To further help traders understand the SMC strategy, I have also created a video on my YouTube channel, where I dive into the details of the strategy and share my insights. The video covers various topics related to SMC, including Liquidity and Orderflow, Order blocks / Supply and Demand Blocks, Fair value gaps, Market structure, Timeframes, and more. You can watch the video by clicking on this link: https://www.youtube.com/watch?v=mln9N-00FlA.

Implementing the SMC strategy is not a guaranteed path to success, but with the right tools and knowledge, it can be a valuable addition to a trader’s toolkit. The SMC Indicator and the accompanying video aim to provide traders with the knowledge and tools they need to successfully implement this strategy.

What is SMC Trading?

First, let’s take a moment to explain what SMC trading is all about. The basic premise of this approach is that “smart money” manipulates the markets to engineer liquidity and run stops of retail traders. Proponents of SMC claim that by understanding the behavior of smart money, traders can gain an edge and identify profitable trades.

The concept of smart money has been around for a long time, but it’s gained particular prominence in the trading community in recent years. SMC trading is often associated with Inner Circle Trader (ICT), a well-known trading educator who promotes this approach.

What Are the Key Principles of SMC Trading?

The key principles of SMC trading can be summarized as follows:

Market Making — According to SMC traders, the market makers are responsible for manipulating the market to their advantage. These traders argue that market makers provide liquidity to the market, but also engineer conditions that are favorable to their positions.

Liquidity and Orderflow — SMC traders focus on understanding liquidity and order flow in the market. They use this information to identify patterns that indicate the behavior of smart money.

Order Blocks/Supply and Demand Blocks — SMC traders believe that order blocks and supply and demand blocks are key areas of the market where smart money is active. By understanding these areas, traders can identify trades with a high probability of success.

Fair Value Gaps — SMC traders believe that fair value gaps, which occur when the market opens above or below its fair value, are indicative of smart money activity. By identifying these gaps, traders can position themselves to profit from smart money behavior.

Market Structure — SMC traders analyze market structure to identify patterns that indicate smart money activity. They believe that by understanding the structure of the market, traders can gain an edge and identify profitable trades.

What Are the Strengths of SMC Trading?

There are several strengths to the SMC trading approach. First, it provides traders with a systematic way to analyze the market and identify profitable trades. SMC traders are focused on understanding the behavior of smart money, which can help them identify patterns and signals that indicate market movement.

Another strength of SMC trading is its ability to provide traders with a sense of confidence. By understanding the principles of SMC, traders can develop a sense of control over the market, which can help them make better decisions.

What Are the Weaknesses of SMC Trading?

Despite its strengths, SMC trading has several weaknesses. The first weakness is its reliance on the concept of smart money. While there’s no doubt that large institutional traders can influence the market, it’s not clear whether this influence is as pervasive as SMC traders suggest.

Another weakness of SMC trading is its over-reliance on short-term trades. Many SMC traders focus on trades with high rewards to risk ratios, but these trades are often very short-term in nature. This approach can make it difficult for traders to achieve consistent profitability over the long-term.

In conclusion, Smart Money Concepts (SMC) is a powerful trading strategy that can help traders identify key levels in the market. With the SMC Indicator and the accompanying video, traders have access to a simplified way of implementing this strategy. While success is not guaranteed, these tools can help traders make better-informed trading decisions based on the principles of the SMC strategy.