How To Trade With The Smart Money Concept (SMS PDF Guide)

Smart money concept PDF teaches you how to master the act of trading in a way that you can tell if you are to buy or sell once you open the market. The act of trading is basically a concept of buying low and selling high in the stock market; not having a full understanding of how the market works will put you off guide, and you end up losing your money.

You are in the right place if you want to learn how to trade Forex with the smart money concept. The smart money concept explains how to master trading in several ways, it shows you the various ways you can handle trading in order to make the best out of it, and it also helps you improve your trading performance.

Additionally, you will get a free PDF guide covering everything you need to know about this powerful strategy, the language of trading, the ins and outs of trading, and the basic things you need to put in place before you start your trading.

What is the Smart Money Concept?

The smart money concept is a trading strategy that aims to follow the footsteps of the large financial institutions and banks that control the forex market. These organizations, which we call banks, are also known as smart money because they have access to more information, resources, and tools than the average retail trader and more than the individuals trying to make some profits from trading.

The smart money concept is based on the idea that it creates and manipulates the market structure, price action, and order flow to achieve its objectives, which is why sometimes trading becomes difficult for some people who have yet to spend time learning and understanding the market. They create liquidity pools, inducing other traders to enter or exit the market, triggering stop losses, and taking profits.

Understanding how the smart money operates, helps you can identify the areas where they are likely to enter or exit the market and align your trades with their direction. This can give you an edge over most traders unaware of the smart money’s influence and often end up on the wrong side of the market.

Smart Money Concept Definition in the Supply and Deman Zone

Smart money concept in supply and demand trading teaches the trading of strategy which aims to identify areas of price where the market is imbalanced, and profit from the subsequent price movements. It is based on the idea that the smart money concept, or the large institutional traders, create significant price moves by accumulating or distributing a large number of orders at certain price levels and then triggering them to cause a rapid price change. The supply and demand zones are the areas where the smart money has left unfilled orders, which act as potential turning points in the market.

You can identify the The supply and demand zones can be identified by looking at the price action and the volume of the market. A supply zone is a price level where the sellers have more power than the buyers, and a demand zone is a price level where the buyers have more power than the sellers. A supply zone is usually formed after a strong bearish move, where the price drops quickly and leaves a price gap. A demand zone is usually formed after a strong bullish move, where the price rises quickly and leaves a price gap. The price gaps indicate that there are a lot of unfilled orders in those areas, which can be triggered when the price returns to them.

The smart money concepts (SMC) in the aspect of supply and demand trading are the following:

• The smart money creates supply and demand zones by manipulating market sentiment and liquidity. They use fake breakouts, news events, and other techniques to induce other traders to enter the market in the wrong direction, and then reverse the price to trap them. This creates liquidity for the smart money to fill their orders at the best prices.
• The smart money uses order blocks to accumulate or distribute their orders in the supply and demand zones. Order blocks are areas of price where a large amount of orders are placed by the smart money, creating enough momentum to push the price in the desired direction. Order blocks can be identified by looking at the impulsive moves that break a high or low, leave an imbalance, or induce other traders to enter the market.
• The smart money follows a specific sequence of actions to execute their trades. They first create the supply and demand zones, then they test them to confirm their validity, and then they trigger them to cause a price movement. The smart money also uses stop hunting, which is the practice of pushing the price to the areas where many stop losses are placed by other traders, to take them out of the market and create more liquidity for themselves.

The supply and demand trading strategy involves identifying the supply and demand zones, the order blocks, and the smart money actions, and then trading in the direction of the smart money. There are two main methods to trade the supply and demand zones: the breakout method and the retracement method. The breakout method involves entering the market when the price breaks out of the supply or demand zone, indicating that the smart money has triggered the zone and the price is likely to continue in that direction. The retracement method involves entering the market when the price retraces back to the supply or demand zone, indicating that the smart money has tested the zone and the price is likely to bounce off it. Both methods require a confirmation signal, such as a candlestick pattern, an indicator, or a trend line, to validate the entry. The stop loss should be placed below or above the supply or demand zone, and the take profit should be placed at the next supply or demand zone, or at a risk-reward ratio of at least 1:2.

The Origine of the Smart Money Concept (SMC)

The origin of SMC is based on the idea of following smart money, which is the capital that is controlled by institutional investors, market mavens, central banks, funds, and other financial professionals. The term “smart money” originated from the gambling world, where it referred to the bets made by gamblers who had a track record of success or insider knowledge.

One of the sources that popularized the SMC trading strategy is The Inner Circle Trader (ICT), which is a program that was developed by a trader named Michael J. Huddleston. ICT offers both free information and commercial Forex mentoring, concentrating on the principles of smart money concept. According to ICT, it teaches traders about the internal working of the markets and how they can replicate the actions of the market makers who are the ones who influence the markets and create liquidity.

The key components of SMC

Order blocks / Supply and Demand: These are areas of price where large volumes of orders are accumulated by the smart money, creating enough liquidity to push the price so that it wll move towards the desired direction. Order blocks can be identified by looking at the characteristics of the impulsive moves that break a high or low, leave an imbalance, or induce other traders to enter the market.

Liquidity: This is the availability of buyers and sellers in the market, and the ease of transactions. Smart money often manipulates the market by creating liquidity in areas where they want to move the price to and from. They do this by opening and closing many buy and sell orders, and creating patterns and trends that attract other traders to join the market. Liquidity which can be easly be found in areas where stop losses and take profits are set by other traders.

Market sentiment: This is the overall attitude and expectation of the market participants towards the future price movements. Smart money often influences the market sentiment by creating false signals, such as fake breakouts, reversals, or continuations, that make other traders believe that the price is going in a certain direction, while the smart money is preparing to move the price in the opposite direction. Market sentiment can be measured by using indicators, which show things such as the Commitment of Traders (COT) report, the Put/Call ratio, or the Volatility Index (VIX).

Reason Smart Money Concept Is Important In Forex Trading Today

SMC is important in Forex trading because it helps traders to understand the dynamics and psychology of the market, and to trade in alignment with the dominant forces that move the price. SMC traders believe that the Forex market is not random or chaotic, but rather controlled and manipulated by the smart money, which are the large institutional traders, market makers, central banks, funds, and other financial professionals who have access to information, resources, and influence that the general public does not. By following the smart money, SMC traders aim to gain an edge over the market and increase their chances of success.

SMC traders use various concepts and tools to identify the areas where the smart money is accumulating or distributing their orders, and to anticipate the direction and timing of the price movements.

• Supply and demand: These are the zones where the smart money has left unfilled orders, which serve as act as potential turning points in the market. Supply zones are where the sellers have more power than the buyers, and demand zones are where the buyers have more power than the sellers. SMC traders look for price gaps, strong moves, and imbalances to locate the supply and demand zones, and trade them using breakout or retracement methods.
• Order blocks: These are the areas where the smart money has placed a large amount of orders, creating enough momentum to push the price in the desired direction. Order blocks are usually formed after a high or low is broken, or after a false signal is created. SMC traders look for impulsive moves, candlestick patterns, and liquidity grabs to identify the order blocks, and trade them using entry and exit signals.
• Liquidity: This is the availability of buyers and sellers in the market, and the ease of transactions. The smart money often creates liquidity in areas where they want to move the price to and from, by opening and closing many orders, and by attracting other traders to join the market. SMC traders look for stop losses, take profits, and market sentiment to locate the liquidity areas, and trade them using stop hunting and reversal techniques.
• Market sentiment: This is the overall attitude and expectation of the market participants towards the future price movements. The smart money often influences the market sentiment by creating false signals, such as fake breakouts, reversals, or continuations, that make other traders believe that the price is going in a certain direction, while the smart money is preparing to move the price in the opposite direction. SMC traders use indicators, such as the Commitment of Traders (COT) report, the Put/Call ratio, or the Volatility Index (VIX), to measure the market sentiment, and trade it using contrarian and trend-following methods.

Using SMC helps traders to gain a deeper insight into the market structure and behavior, and avoid being trapped or fooled by smart money concepts. SMC traders can also improve their risk management, trade selection, and execution, by following the specific sequence of actions that the smart money uses to create, test, and trigger the supply and demand zones. SMC traders can also enhance their trading performance, by developing a trading plan, a trading journal, and a trading mindset, that are aligned with the SMC philosophy and principles. SMC is not a magic formula or a guaranteed way to make money in the Forex market, but rather a trading approach that requires discipline, patience, and practice to master. SMC is a way of thinking and trading like the smart money, and not against them.

Steps To Implement The Smart Money Concept (SMC)

To implement the smart money concept (SMC) in your Forex trading, you can follow these steps:

1. Select a specific currency pairing and designate a time interval that suits your trading style and objectives. Now you can easily use popular currency combines, such as GBP/USD, EUR/USD, USD/JPY, or USD/CHF, because they have a very high liquidity and volatility. Also, they are part of the things that influenced by the smart money concept. Apart from that, another option that you can use is the high time frame, which is the daily, weekly, and monthly charts, as they show the bigger picture and the long-term trends of the market and are less affected by the noise and fluctuations of the lower time frames.
2. You need first to identify the supply and then the demand zone while on the chart using the price action and the volume indicators. Look for price gaps, strong moves, and imbalances that indicate where the smart money has left unfilled orders, which act as potential turning points in the market. Mark the supply and demand zones with horizontal lines or rectangles, and label them as S (supply) or D (demand). You can also use the COT report to confirm the supply and demand zones by looking at the positions and activities of the different types of traders that are in the futures market and seeing if they align with the zones.
3. Identify the order blocks on the chart using the price action and the volume indicators. Look for impulsive moves, candlestick patterns, and liquidity grabs that indicate where the smart money has placed a large number of orders, creating enough momentum to push the price in the desired direction. Mark the order blocks with horizontal lines or rectangles, and label them as OB (order block). You can also use the put/call ratio to confirm the order blocks by looking at the ratio of the number of put options to the number of call options traded in the market and seeing if they match the direction of the order blocks.
4. Identify the liquidity areas on the chart using the price action and the volume indicators. Look for stop losses, take profits, and market sentiment that indicates where many traders have placed their orders, creating liquidity for the smart money to take advantage of. Mark the liquidity areas with horizontal lines or rectangles and label them as L (liquidity). You can also use the VIX to confirm the liquidity areas by looking at the level of fear and uncertainty in the market and seeing if they correlate with the liquidity areas.
5. Trade the supply and demand zones using the breakout or the retracement method. The breakout method involves entering the market when the price breaks out of the supply or demand zone, indicating that the smart money has triggered the zone and the price is likely to continue in that direction. The retracement method involves entering the market when the price retraces back to the supply or demand zone, indicating that the smart money has tested the zone and the price is likely to bounce off it. Both methods require a confirmation signal, such as a candlestick pattern, an indicator, or a trend line, to validate the entry. The stop loss should be placed below or above the supply or demand zone, and the take profit should be placed at the next supply or demand zone or a risk-reward ratio of at least 1:2.
6. Trade the order blocks using the entry and exit signals. The entry signal is when the price reaches the order block, indicating that the smart money is ready to move the price in the direction of the order block. The exit signal is when the price reaches the next supply or demand zone or the next liquidity area, indicating that the smart money has reached its target and is ready to reverse the price. The stop loss should be placed below or above the order block, and the take profit should be placed at the next supply or demand zone, the next liquidity area, or at a risk-reward ratio that is within or at least 1:2.
7. Trade the liquidity areas using the stop-hunting and reversal techniques. The stop-hunting technique involves entering the market when the price reaches the liquidity area, indicating that the smart money is pushing the price to the area where other traders place many stop losses to take them out of the market and create more liquidity for themselves. The reversal technique involves entering the market when the price reverses from the liquidity area, indicating that the smart money has completed its stop-hunting and is ready to move the price in the opposite direction. Both techniques require a confirmation signal, such as a candlestick pattern, an indicator, or a trend line, to validate the entry. The stop loss should be placed below or above the liquidity area, and the take profit should be placed at the next supply or demand zone, the next order block.

These are the basic steps to implement the SMC in your Forex trading. However, you should also consider other factors, such as the market conditions, the economic news, the risk management, and the trading psychology, that may affect your trading performance. You should also practice and backtest your SMC trading strategy first on a demo account before you even think of applying it to a live account. SMC is not a foolproof or easy way to trade the Forex market, but rather a challenging and rewarding way to trade with the smart money and not against them.

How The Smart Money Concetp (SMC) Works

SMC works by following a specific sequence of actions that the smart money uses to create, test, and trigger the supply and demand zones in the Forex market. The sequence the SMC folllows is as follows:

• Create: The smart money creates the supply and demand zones by manipulating the market sentiment and the liquidity. They use fake breakouts, news events, and other techniques to induce other traders to enter the market in the wrong direction, and then reverse the price to trap them. This creates liquidity for the smart money to fill their orders at the best prices. The supply and demand zones are the areas where the smart money has left unfilled orders, which act as potential turning points in the market. SMC traders look for price gaps, strong moves, and imbalances to locate the supply and demand zones.
• Test: The smart money tests the supply and demand zones by retracing the price back to them, to confirm their validity and to induce more traders to join the market. The smart money uses order blocks to accumulate or distribute their orders in the supply and demand zones. Order blocks are areas of price where a large amount of orders are placed by the smart money, creating enough momentum to push the price in the desired direction. SMC traders look for impulsive moves, candlestick patterns, and liquidity grabs to identify the order blocks.
• Trigger: The smart money triggers the supply and demand zones by breaking out of them, causing a swift directional surge in price of the smart money. The smart money also uses stop hunting, which is the practice of pushing the price to the areas where many stop losses are placed by other traders, to take them out of the market and create more liquidity for themselves. SMC traders look for stop losses, take profits, and market sentiment to locate the liquidity areas, and trade them using stop hunting and reversal techniques.

SMC traders also use various tools and indicators to identify the supply and demand zones, the order blocks, the liquidity areas, and the market sentiment, and to trade them using breakout or retracement methods.

• Price action: This is the study of the movement of the price, and the patterns and formations that it creates on the chart. Price action reflects the psychology and behavior of the market participants, and the influence of the smart money. SMC traders use price action to identify the supply and demand zones, the order blocks, and the entry and exit signals.
• Volume: This is the measure of the amount of trading activity in the market, and the intensity of the buying and selling pressure. Volume indicates the strength and validity of the price movements, and the presence and activity of the smart money. SMC traders use volume to confirm the supply and demand zones, the order blocks, and the liquidity areas.
• COT report: This is the Commitment of Traders report, which is a weekly report that shows the positions and activities of the different types of traders in the futures market, such as commercial traders, non-commercial traders, and retail traders. The COT report reveals the market sentiment, and the intentions and expectations of the smart money. SMC traders use the COT report to gauge the market sentiment, and to trade in the direction of the smart money.
• Put/Call ratio: This is the ratio of the number of put options to the number of call options traded in the market. The put options are just the contracts which gives the option bestows upon purchasers the ability to vend an asset at a predetermined price and time, while call options are just contracts that give the buyer the right acquiring an asset at a predetermined price and timeframe. The put/call ratio reflects the market sentiment, and the bullishness or bearishness of the traders. SMC traders use the put/call ratio to measure the market sentiment, and to trade against the crowd.
• VIX: This is the Volatility Index, which is a measure of the expected volatility that is known as the S&P 500 index over the next 30 days. Now the VIX is also known as the fear index, as it measure of the prevailing level of fear and uncertainty in the market. The VIX is inversely correlated with the market, meaning that when the VIX is high, the market is low, and vice versa. SMC traders use the VIX to measure the market sentiment, and to trade with the trend.

SMC works by using these tools and indicators to follow the smart money, and to trade in alignment with the dominant forces that move the price. SMC traders can improve their trading performance by developing a trading plan, a trading journal, and a trading mindset, that are aligned with the SMC philosophy and principles. SMC is not a magic formula or a guaranteed way to make money in the Forex market, but rather a trading approach that requires discipline, patience, and practice to master. SMC is a way of thinking and trading like the smart money, and not against them.

How to Trade Forex with the Smart Money Concept PDF

To effectively trade Forex utilizing the smart money concept, a systematic approach involving four crucial steps must be adhered to.

1. Identify the market structure and trend: The market structure is the way the price moves in a series of highs and lows, forming patterns and cycles. The general direction in which the price moves is referred to as the trend, which can be either bullish, bearish, or sideways. It would help to get a clear picture of the market context and the smart money’s intentions.

2. Locate the order blocks and supply and demand zones: An order block is an area of price where the smart money has accumulated their orders, either to buy or sell and where they are likely to initiate a significant movement. A supply and demand zone is an area of price where there is an imbalance between the buyers and sellers and where the price is likely to reverse or bounce. It would help to mark these zones on your charts, as they are potential entry and exit points for your trades.

3. Observe the price action and market behavior: The price action is how the price moves and reacts to the order blocks and supply and demand zones. The market behavior is how the other traders respond to the price action and the smart money’s manipulation. It would help if you observed the price action and market behavior in the lower time frames, looking for clues and signals that indicate the smart money’s presence and direction. Some of the clues and signs are:

• Breakouts and fakeouts: A flight is when the price surpasses a crucial support or resistance level, it is deemed significant, indicating a continuation of the trend. A fakeout is when the price halts through a story but quickly reverses, indicating a trap or a reversal. Smart money often creates breakouts and fakeouts to induce other traders to enter or exit the market, taking advantage of their orders.
• Imbalances and gaps: An imbalance is when the price leaves behind an unfilled space between the candle wicks, indicating a strong and fast movement. A hole is when the price jumps from one level to another, leaving room on the chart, and showing a sudden and drastic change in the market sentiment. Smart money often creates imbalances and gaps to create liquidity and momentum, then fills them later.
• Candlestick patterns and formations: A candlestick pattern combines one or more candlesticks that form a recognizable shape or structure, indicating a potential reversal or continuation of the trend. A candlestick formation is a group of candlesticks that include a specific pattern or arrangement, showing the power or fragility of the fluctuations in pricing. Smart money often uses candlestick patterns and formations to communicate their intentions and actions and to confirm or deny the validity of the order blocks and supply and demand zones.

4. Execute and manage your trades: Once you have identified the market structure and trend, located the order blocks and supply and demand zones, and observed the price action and market behavior, you are ready to execute and manage your trades. You need to follow a clear and consistent trading plan that defines your entry, exit, and risk management rules. Some of the rules are:

• Entry: You should enter the market when the price reaches an order block or a supply and demand zone and when the price action and market behavior confirm the smart money’s direction. You should use a combination of technical indicators, such as moving averages, trend lines, and oscillators, to filter your entries and avoid false signals.
• Exit: You should exit the market when the price reaches your target, which should be another order block or supply and demand zone, or when the price action and market behavior indicate a change in the smart money’s direction. It would help if you used a combination of technical indicators, such as trailing stops, Fibonacci retracements, and pivot points, to lock in your profits and protect your capital.
• Risk management: You should manage your risk by using a proper position size, which should be a percentage of your trading account, and by placing a stop loss, which should be below or above the order block or supply and demand zone that you entered from. It would help if you also used a risk-reward ratio, which should be at least 1:2, meaning that your potential profit should be twice as much as your possible loss.

Smart Money Concepts (Brandsprof.com) PDF

Common Mistakes To Avoid In Smart Money Concept

Some common mistakes to avoid in smart money concept (SMC) trading are:

• Trading without a plan: SMC trading requires a clear and consistent trading plan that defines the entry and exit rules, the risk management, and the trading objectives. Problems. One thing you should understand is that if you trade without a plan, it can lead to emotional and impulsive decisions and inconsistent and poor results.
• Trading against the trend: SMC trading involves following the direction and timing of smart money, which are the dominant forces that move the market. Trading against the trend can result in losing trades, as smart money can easily overpower the counter-trend traders and reverse the price.
• Trading without confirmation: SMC trading involves using various tools and indicators to identify the supply and demand zones, the order blocks, the liquidity areas, and the market sentiment and to trade them using breakout or retracement methods. Trading without confirmation can result in false signals, as the smart money can create fake breakouts, reversals, or continuations to trap and fool the other traders.
• Trading without stop loss: SMC trading involves placing the stop loss below or above the supply or demand zone, the order block, or the liquidity area to protect the trade from unexpected price movements. Trading without stop loss can result in huge losses, as the smart money can push the price to the areas where many stop losses are placed by other traders, to take them out of the market and create more liquidity for themselves.
• Trading without take profit: SMC trading involves placing the take profit at the next supply or demand zone, the next order block, the next liquidity area, or at a risk-reward ratio of at least 1:2 to lock in the profits from the trade. Trading without taking profit can result in missed opportunities, as smart money can reverse the price from the target areas and erase the profits from the trade.
• Trading without patience: SMC trading involves waiting for smart money to create, test, and trigger the supply and demand zones and execute their trades in a specific sequence of actions. Trading without patience can result in premature entries or exits, as smart money can take their time to manipulate the market and to fill their orders at the best prices.
• Trading without practice: SMC trading involves mastering the concepts and tools of SMC and developing a trading mindset that is aligned with the SMC philosophy and principles. Trading without practice can result in poor performance. SMC trading is not a magic formula or a guaranteed way to make money in the Forex market, but rather a challenging and rewarding way to trade with smart money and not against it.

Smart Money Concept Free PDF Download

If you want to learn more about the smart money concept and how to apply it to your forex trading, you can download a free PDF guide that covers everything you need to know about this strategy HERE. 

The comprehensive PDF guide is partitioned into multiple segments that intricately elucidate the idea of smart money, with the aid of numerous instances, graphs, and illustrations. Several of these segments comprise.

• Introduction: This section gives an overview of the forex market, the smart money concept, and the benefits and challenges of trading with this strategy.
• Market Structure and Trend: This section explains how you can easily identify and analyze the deep market structure and trend on multiple time frames, and how to use them to determine the market context and the smart money’s objectives.
• Order Blocks and Supply and Demand Zones: This section explains how to locate and mark the order blocks and supply and demand zones on your charts and how to use them to find potential entry and exit points for your trades.
• Price Action and Market Behavior: This section explains how to observe and interpret the price action and market behavior on the lower time frames and how to use them to identify the smart money’s presence and direction.
• Trade Execution and Management: This section explains how to execute and manage your trades with the smart money concept and how to use technical indicators, position size, stop loss, target, and risk-reward ratio to optimize your trading performance.

To download the PDF guide, click this link and follow the instructions. You will be required to put in your real name and working email address, and then you will receive the PDF guide in your inbox. The PDF guide is free, and you can access it anytime.