What is Smart Money Concepts (SMC)?

Smart Money Concepts (SMC) is a trading framework based on the theory that the way in how the market moves is not completely random.

Instead, SMC operates on the idea that market movements are heavily influenced or controlled by "Smart Money".

"Smart Money" refers to the large institutions that execute huge volumes of trades, such as hedge funds, central banks and mega-corporations.

With the trades of these large institutes involving billions of dollars being injected or taken out of the market, they wouldn't be able to enter or exit their trades at any random moment without causing a very reactive move of the market's price.

So to combat this, SMC uses the theory that these institutions will instead target areas in the market that contains a large amount of liquidity, that will allow their massive orders to be filled without having as large of an immediate reaction. Which would mean they are able to fill their large orders at the ideal price they are looking for.

The SMC framework focuses on finding these footprints left behind by institutes, to gain an idea on where the market wants to move to (Draw on Liquidity Target).

Who is ICT (Inner Circle Trader)?

ICT is the founder of the "Smart Money Concepts" framework, which many believe is a modernised and repackaged version of the classical Wyckoff Theory which uses pure supply and demand principles.

But over the years, ICT has developed and advanced his concepts to a point that SMC has become one of the most popular trading strategies out there, with many newer mentors basing their own ideas and strategies off of it as a cornerstone.

Core Philosophy behind SMC

SMC as a philosophy, with every trading strategy that is based on it's framework, can be broken down into 3 key principles:

• Liquidity Drives Everything:

  The movements of a market are simply price delivering from one Liquidity Pool (where unfilled orders are resting), to another.
  
  

• Stop Hunts aren't random, they are deliberate:
  Price is intentionally delivered to specific key levels to absorb the stop-losses of retail traders, as these are the Liquidity Pools that provide the necessary Liquidity for institutions to enter/exit their massive positions.
  
  

• Retail patterns are traps:
  Classical technical analysis patterns like head and shoulders patterns, double tops, double bottoms and support/resistance lines are viewed as Liquidity Pools, engineered to trap retail traders.

What are PD Arrays?

In SMC, the idea is that institutions leave behind 'footprints' that can be used as price areas in the chart where the market is most likely to react, reverse, or continue it's trend.

These 'footprints' are what we call PD Arrays (Premium/Discount Array), which are points of interest that can cause some form of reaction when price has delivered to them.

PD Array Variations:

• External Range Liquidity (Old Highs/Old Lows).

• Fair Value Gaps.

• Inversion Fair Value Gaps.

• Order Blocks.

• CISDs.

In this course, we will be covering each important PD Array individually, before later looking at how we can tie them together for form a solid SMC trading strategy.