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SMC GUIDE
Basic Introductory guide to Smart Money Concepts

Introduction
Here we have created a simple SMC Guide on how we approach the
Forex Markets using Smart Money Concepts.

This SMC Guide will help give you a basic understanding of how Smart
Money Concepts can be utilised within trading.

Orderblocks / Supply &

Demand
An Orderblock / Supply & Demand is an area of price where
;nancial institutions and banks have collated their orders, to
gain enough liquidity to push price in the direction they
intend. (in the direction that follows the order Cow planned by
them) Think of it like a foot print the banks have left behind.
We have all seen large movements in price on the charts no
doubt, and these large movements often leave behind clues
as to what the banks are doing. By looking at the way price
makes an impulsive move, we can determine if it is a
favourable place (position/area) to for a potential trade,
depending on a few characteristics, such as:

• Breaking a High / Low

• Leaving Imbalance
• Inducement (Creating liquidity, covered later on)

It is not necessary to have all 3, but the more of the above

points that an Orderblock creates, the better. See examples
below:

Breaking High/Low

The movement from the Orderblock

broke past the recent high before
coming back to the Orderblock.

BearishOrderblock

Lowbroken

The movement from the Orderblock

broke past the recent low before
coming back to the Orderblock.

Leaving Imbalance

The Orderblock left behind un;lled price between the candle

wicks. This often causes price to pull back to re;ll the gap that
has been left behind.

Inducement

Inducement is when price has been manipulated in such a

way that it creates liquidity in areas that banks want to move
price to and from. In the example above, you can see that an
Orderblock was formed by an impulsive move, then price
ranged for a bit. The $ symbols show where liquidity most
likely lies and where banks will likely want to manipulate price
before pushing upwards. Once price has swept the liquidity at
the bottom of the range, it then can continue its move to the
upside. We shall look into liquidity further on the next page.

Liquidity
Think of liquidity as how many buyers and sellers are present,
and whether transactions can take place easily.

Example, if there is 10 people buying at £1, there needs to be 10

people selling for £1 for it to be a perfectly liquid market. Now
on a much larger scale, there is on average $6.6 Trillion traded
daily on the forex market. Yes Trillion. So in order for Banks,
Hedge funds and other ;nancial institutions to trade the large
volumes they do each day, they need to manipulate the
market by creating liquidity.

The way they do this, is by opening lots of Buy and Sell orders,
and moving price to create, patterns and trends. This in turn
induces other traders, like us retail traders or even other
institutions to get into the market.

How we could use this to our advantage

Other traders stop losses and take pro;ts that are set, are also
a form of liquidity to the large ;nancial institutions.

By knowing this, we can anticipate the likely areas most

traders may have their targets set. If we take the most
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common trading strategies, such as trading pattern, trendlines
candle stick pattern etc. We can then get a good idea where
banks may push price to clear liquidity.

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Entry Models
An entry model is combining conCuences like, Orderblocks, Price
Action and Inducement to optimise your entry into a trade. Perfecting
this can allow you to be far more precise with your entries, and give
you the option to use a tighter stop loss. Here are some of my
favourite entry models to use when entering a trade.

In this example, an orderblock was created that broke the recent high.
After an impulsive move, price consolidated, creating liquidity above
and below the range. This entry model would be higher probability if
liquidity below the range was swept 1st in order to hit the orderblock,
leaving the liquidity above the range to give price a reason to push up.
Vise versa for a bearish orderblock.

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In this example, an orderblock was created that broke the recent high.
After an impulsive move, price started to create lower highs and lower
lows. This is inducing liquidity above the lower highs where it is likely
that stop loses will be. The order block will need to be tapped into
before sweeping the liquidity otherwise it will not be vaild. Vise versa
for a bearish orderblock.

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In this example, we have began with a range creating liquidity both

above and below. Once liquidity has been swept, and tapped into the
higher time frame (HTF) orderblock, we wait for a rejection of this area
and a lower time frame (LTF) orderblock form creating our entry point.
Vise versa for a bearish orderblock.

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In this example, we have began with a range creating liquidity both

above and below. Very much like the previous example, we have swept
liquidity and pushed in the other direction and entered off the newly
formed orderblock.

But in this example, the orderblock that caused liquidity to be swept

from the range will likely become whats known as a breakerblock.

This can be thought of similar to how support and resistance use a

break and retest method. The reason the breakerblock is there, is often
both sides of the range need liquidity to be swept and the breakerblock
is a great catalyst for fuelling that move.

I like to use breakerblocks as a scale in for a 2nd trade entry providing

my original trade is above 1% proRt and SL to entry.

We hope you Rnd this SMC Guide useful. If you haven’t checked out our
YouTube channel yet, we have also covered some of these topic in
more detail.

We also have plenty of content on our Instagram page so feel free to

follow for more free trading tips.

If you haven’t yet joined our community and taken advantage of our
online course material, where we cover things in a lot more detail, plus
much more SMC topics then click below to get setup.

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