What is the SMC (Smart Money Concepts) forex strategy? – EarnForex News | Jewelry Dukan

If you’ve been anywhere near forex forums or social media lately, you’ve no doubt heard people talking about it Smart Money Concepts (SMC) Trade.

You may be wondering what SMC is and if it deserves all the hype. In this post, we will introduce you to trading using Smart Money Concepts so that you can make an informed decision on whether or not to try this strategy in your own trading.

What is SMC Forex Trading?

The easiest way to describe trading with Smart Money Concepts is to say that they are price actions by a different name.

SMC involves using classic forex concepts such as supply and demand, price patterns, and support and resistance to trade, but everything has been renamed and described in a different way.

SMC traders refer to ideas like “Liquidity Grabs” and “Mitigation Blocks”. While their terminology may sound alien, if you examine SMC, you’ll find that it’s a more traditional trading approach than meets the eye.

First, let’s get something out of the way. There’s nothing wrong with someone using SMC if it works for them. However, in this post we will be critical of some aspects of SMC, so be prepared.

SMC theory

SMC is not just a Forex trading strategy, it is a whole philosophy about how the markets work.

Basically, SMC states that market makers (i.e. banks, hedge funds, etc.) are manipulative entities and, moreover, that they actively make life difficult for retailers.

According to SMC, as a retail trader, you should base your strategy on what is happening with the “smart money” (ie market makers’ money).

In fact, you should try to base your trading on how these market makers trade. They deal with supply, demand and market structure. So, as an SMC trader, keep that in mind when making your own trading decisions.

Where does SMC forex trading come from?

Smart Money Concepts was created with The trader of the inner circle (ICT), a program offered by a dealer named Michael J. Huddleston. ICT offers some free resources as well as paid forex mentorship.

SMC core concepts and terminology

SMC sounds very technical when you first read about it. You may be scratching your head at the basic vocabulary. To help you, here are explanations of some common terms used by SMC dealers:

  • Order Blocks: This terminology is used to discuss supply and demand. Some SMC traders say order blocks are a “more sophisticated” concept than regular supply and demand, but others dispute that claim.
  • Breaker Blocks and Mitigation Blocks: These terms refer to support and resistance.
  • Fair Value Gaps: This term describes an imbalance. There are a variety of different types of gaps, all identified years ago. Some examples are common gaps, exhaustion gaps, breakaway gaps, and runaway gaps.

You’ll find that you’re familiar with other SMC concepts once you figure out what the fancy terminology refers to.

When analyzing the markets, SMC focuses heavily on the “structural break” in the market or “BOS”.

Here is a diagram illustrating structural breaks. Every time the price surpasses the previous high, there is a structural break. We then see a character change (ChoCH) when the price falls below previously set lows.

Controversies surrounding smart money concepts in forex trading

SMC is controversial for a few important reasons:

  • The theory behind it is wrong.
  • SMC does not act “like the banks”.
  • Even if it can work, it is not new.

The errors in theory

What is the flaw in the theory behind SMC? It comes back to what we mentioned earlier about market makers.

SMC traders say manipulations by “smart money” players are the reason certain SMC patterns form. However, SMC provides no evidence that these manipulations take place or are responsible for the patterns.

There is little logic in explaining that intelligent money manipulation creates the patterns. It’s true that banks and other big players move the markets. But it is not true to say that these market makers are out to get retailers and are actively conspiring to manipulate the markets. Instead, their role in the markets is to create liquidity.

Simply put, market makers don’t care about your existence. Retailers, by and large, just aren’t that significant, even if you add them all up.

Does this mean that market manipulation is a myth? no It happens, but not in the way SMC describes it.

No different than regular retail

SMC traders believe that they are acting like the market makers and not like other retailers and that this gives them an advantage that their retail peers lack.

In truth, SMC dealers trade exactly like their retail counterparts. They don’t act “like the banks”.

New terms, old concepts

After all, all the repackaging and fancy terminology is a source of irritation for many traders.

ICT made a lot of money teaching dealers SMC. Nothing wrong with that per sesince they teach methods that can to be useful. But some traders feel that presenting these old concepts as if they were brand new is somewhat disingenuous.

On top of that, learning all these new terms makes things unnecessarily complicated.

SMC isn’t reinventing the wheel so much as simply renamed the bike and pack it in fresh new packaging. It’s still a wheel. It spins the same way and can take you to the exact same destination.

Why bother learning a new language to discuss something you’re probably already familiar with?

It’s just going to be easier to talk about for most (though not all) traders support and Resistance.

Pros and cons of SMC

Advantages of SMC:

  • Trading smart money concepts does seem to work for some traders. If it works for you, there’s no reason not to use it. be able to grasp consistently What Price doing and benefiting from his behavior is more important than knowing why The price moves as it is.
  • Price movements have a decades-long history of producing results for many people not only in currencies but in other assets as well. Since SMC price action is repackaged, it is does have a solid core.
  • Some people find price action easier to understand when presented as an SMC.
  • While the theory that large institutions target retailers is dubious, it seems plausible to point out that larger institutions sometimes take care of smaller ones and create some of what we see. There are liquidity handles, even if SMC presents them in a questionable framework. So some of SMC’s theoretical elements may be useful, just not in the way SMC describes them.

Disadvantages of SMC:

  • Some of SMC’s theoretical elements don’t seem to make much sense when you think logically about how irrelevant retailers are to the big players. Believing wholeheartedly in everything SMC presents could lead to misunderstanding the fundamentals of the market.
  • You can neither prove nor disprove the theories behind SMC. They are purely speculative, and only an insider could provide concrete evidence either way. This means that nobody can verify SMC’s reality model, but nobody can refute it one hundred percent either. All anyone can do is argue based on what they believe about what institutions are doing.
  • Switching all the terminology around like SMC does can lead to an unnecessarily involved price action learning process, especially if you’re already familiar with standard price action language. It can also make it difficult for you to share what you learn with others who speak the regular language of price action.
  • Many people are put off by the elitist mystique surrounding SMC and find it deceptive to sell old concepts as new. Also, we are using the word “sell” very literally here. While there are many free SMC resources out there, you will encounter many pay gates when trying to learn SMC.

Should you trade with SMC?

Trading Smart Money Concepts probably wouldn’t be as popular as it is now if some traders didn’t find it intuitive.

If you like how SMC expresses its terminology and techniques, then by all means check it out.

Just be aware that the strategy is a repackaged form of good old fashioned price action trading and you are doing the same as many other retailers.

There’s nothing wrong with that, though, because good old-fashioned price action trading is a tried-and-true technique that’s been profitable for many traders for decades.

If SMC’s strange terminology confuses you, or you’re looking for more free resources (many SMC programs have paywalls), just study the price action. You will learn the same thing anyway.

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