📍 Core Concept

Smart Money Concepts

Understanding institutional trading behavior and order flow.

APOLLO ENCYCLOPEDIA

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What It Is

Smart Money Concepts (SMC) is a framework for understanding how institutional traders and market makers operate. It focuses on order blocks, liquidity pools, fair value gaps, and the manipulation patterns institutions use to accumulate and distribute positions.

Key insight: Institutions can't enter or exit large positions at a single price — they need liquidity. They create that liquidity by triggering retail stop losses and inducing retail traders to take the wrong side. Smart money concepts help you identify where this manipulation occurs.

Key SMC terminology: Order blocks are zones where institutions placed large orders. Liquidity pools are clusters of stop losses below lows or above highs. Fair value gaps (FVGs) are imbalances in price where the market moved too quickly, often revisited later.

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Applying SMC

Trade with institutional flow, not against it.

Identify where smart money is accumulating (buying) and position yourself in the same direction. Look for order blocks on higher timeframes as high-probability entry zones.

Liquidity sweeps as setups.

When price sweeps below a key low (taking out stops) and immediately reverses, that's a liquidity grab. These sweeps often mark the beginning of a move in the opposite direction. Wait for the sweep, then enter with the reversal.

Strategy 3

SMC works best when combined with classical technical analysis. Order blocks align with support/resistance. Liquidity sweeps align with stop hunts. FVGs align with gaps. The concepts overlap — SMC gives you the 'why' behind the levels.

💡Pro Tip

Apply this concept in combination with others. No single concept tells the whole story - confluence is key.

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