What is SMC? The Forex trading strategy used by the general public investors

In rapidly changing financial markets, many traders make decisions based on feelings or insufficient information. Meanwhile, the general investors have a systematic and effective analysis approach, leading to the emergence of an important concept called Smc or Smart Money Concept. It is a method that helps ordinary traders understand and follow the movements of “smart money” to increase the chances of sustainable profits.

What is Smc: An In-Depth Understanding of Large Investor Behavior

Smc, or the concept of trading based on the movement of smart money, is a technical approach focused on studying the trading patterns of the general investing public. This group, called “Smart Money,” includes central banks, large financial institutions, and hedge funds with billions in capital.

What makes Smc special is that instead of relying solely on technical indicators, traders learn to read the “traces” left by big investors on price charts. By studying these behaviors, they can forecast future market trends with higher accuracy.

Main Components that Build Smc: Order Blocks and Key Liquidity

Supply and Demand: The Fundamental Market Forces

Supply and Demand are basic mechanisms driving all price changes. Large investors understand this deeply and exploit it by buying or selling in massive volumes at points where demand is low or supply is high.

Order Blocks: Zones of Smart Money Accumulation

Order Blocks are areas on the chart where big investors buy or sell large quantities. These can be identified by sharp price movements following significant activity. These zones often become key reference points for future traders.

Liquidity Pools: Areas Prepared by Investors

Liquidity Pools or high-liquidity zones are areas where large buy or sell orders accumulate. Large investors know these are often points where prices move quickly. They buy or sell to create “artificial signals” and trap small traders who are not cautious.

Market Structure: Reading Trend Patterns

Market Structure involves analyzing past price movements to predict future directions. Smc emphasizes identifying key patterns such as:

• Uptrend: Higher highs and higher lows
• Downtrend: Lower highs and lower lows
• Sideways: Price moves within a range without clear trend

How Smc Works in Trading

Unlike guessing, Smc uses rational analysis and data. Traders study buying and selling pressures on the chart and decide when to enter or exit based on high-probability setups.

This process includes:

1. Reading Break of Structure (BOS): When price breaks through significant resistance or support levels, signaling a potential trend change.
2. Observing Change of Character (CHoCH): When the trend’s structure shifts, e.g., from uptrend to downtrend, indicating a key turning point.
3. Identifying Entry and Exit Points: Using identified zones, traders can set entries and exits where institutional activity influences the market.

Advantages of Using Smc and Challenges to Overcome

Strengths

👍 Deeper Market Understanding: Smc helps you understand why the market moves the way it does and how large investors behave, beyond just looking at charts emotionally.

👍 More Accurate Predictions: Analyzing traces left by big players allows for better forecasting of price movements.

👍 Flexible Strategies: Smc can be applied across various timeframes, from short-term to long-term trading.

👍 Risk Reduction: Proper risk management helps preserve capital more effectively.

Challenges

👎 Learning Curve: Smc is a complex concept requiring continuous practice and patience.

👎 Real Experience Needed: Theoretical knowledge alone isn’t enough; practicing in live markets or demo accounts is essential.

👎 Potential Noise Signals: On very short timeframes, signals may be unclear, leading to possible mis-trades.

👎 Inherent Risks: Using Smc does not guarantee profits; trading always involves risk.

How to Effectively Apply Smc in Forex Markets

Choose Appropriate Timeframes

Smc works best on longer timeframes like Daily or Weekly. Shorter timeframes may produce ambiguous signals and more noise.

Identify Supply and Demand Zones

Analyze charts to find reversal points or significant shifts—these are areas of Supply (excess supply) and Demand (excess buying).

Analyze Market Structure with Technical Relationships

Observe patterns such as BOS (Break of Structure) or CHoCH (Change of Character) to identify trend shifts.

Plan Entry and Exit Points

Before entering trades, set proper Stop Losses to limit losses and Take Profits at next Supply or Demand zones, considering identified Order Blocks or Liquidity Pools.

Manage Money Carefully

Use appropriate position sizing to control risk. Avoid risking too much on a single trade.

Smc vs Price Action: Which Approach to Choose?

Traders interested in deep learning find Smc a powerful tool, but it requires time and practice. Price Action offers a faster, less complicated alternative.

How to Profitably Trade Forex Using Smc

Starting Steps

1. Learn Basic Principles: Study Supply and Demand, Market Structure, Order Flow, and core Smc concepts.
2. Practice Chart Reading: Analyze charts across timeframes, identify BOS, CHoCH, and Order Blocks.
3. Learn from Real Examples: Review trades from experienced traders.

Practical Steps

• Select Forex Pairs: EUR/USD, GBP/USD, or others.
• Check the Main Trend: Is the market bullish, bearish, or sideways?
• Identify Entry Points: Wait for BOS or CHoCH signals, which often indicate entry opportunities.
• Set Proper Stop Losses: To manage risk.
• Set Take Profits: Near Supply or Demand zones ahead.

Trading with MiTRADE

You can apply Smc on the MiTRADE platform by trading CFDs, allowing you to open positions based on predicted price directions. Buy if you expect prices to rise, or sell if you expect them to fall. Leverage of 1:200 provides flexibility.

💸 Special Offer for New Customers 💸

• $100 bonus for new account openings
• Minimum deposit only $50
• Low spreads and 0 commission
• Free demo account with $50,000 for practice

Summary: The True Meaning of Smc

Smc is not just about quick profits but understanding how markets work and how large investors think, act, and behave. With this knowledge, ordinary traders can position themselves more rationally rather than guessing.

Success with Smc depends on:

• Continuous Learning: Persistent effort and patience.
• Practice: Using demo accounts before real trading.
• Risk Management: Discipline in managing risk.
• Adaptability: Adjusting strategies as markets evolve.

If you understand and properly apply Smc, you’ll gain insights most traders lack, potentially marking the start of your trading success.