Smart Money Concepts (SMC) Explained: The Ultimate 2026 Guide
Smart Money Concepts (SMC) is a framework that follows institutional order flow. It helps retail traders align with the moves created by banks and large funds.
What Are Smart Money Concepts?
Smart money refers to institutions with large capital. Their orders leave clues in price action, and SMC teaches you how to read them.
Core SMC Concepts
Market Structure
- Bullish: higher highs and higher lows
- Bearish: lower highs and lower lows Structure defines bias.
Break of Structure (BOS) and Change of Character (ChoCh)
- BOS confirms trend continuation
- ChoCh signals a potential reversal
Order Blocks
An order block is the last opposing candle before a strong move. These zones often act as high-probability entry areas.
Fair Value Gaps (FVG)
FVGs are price imbalances. Markets often return to fill them.
Liquidity and Stop Hunts
Liquidity sits above highs and below lows. Institutions often grab this liquidity before reversing.
Premium and Discount
Buy in discount (lower half of a range) and sell in premium (upper half).
A Simple SMC Workflow
- Define the higher timeframe bias.
- Mark recent liquidity and key levels.
- Wait for BOS or ChoCh.
- Find the related order block or FVG.
- Enter on a retracement with confirmation.
- Place stops beyond the zone and target the next liquidity area.
Quick Example
- Bias: bullish on daily
- BOS on 4H
- Price retraces into bullish order block
- Entry on bullish rejection
- Stop below the order block
- Target previous high
Common SMC Mistakes
- Ignoring higher timeframe structure
- Marking every candle as an order block
- Entering without confirmation
- Oversizing positions
Key Takeaways
- Structure defines direction
- Order blocks and FVGs highlight entry zones
- Liquidity is where price is pulled
- Risk management is still required
Next Steps
- Read Complete Forex Guide - Start with fundamentals
- Learn 7 Best Strategies - Proven approaches
- Join 5,000+ Traders - Free account with courses and games
About the Author: Pip Campus SMC Department - Teaching retail traders to think like institutions.
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