Smart Money Concepts
Lesson 19 of 39 in the course “Crypto”. Free, with animations and a quiz.
SMC (Smart Money Concepts) reads the chart through the moves of “smart money”, meaning big players. The idea: price hunts liquidity. Here the crowd’s stops below were taken, and big players started buying.
An impulse, a sharp strong move up, breaks the structure: price takes out the previous peak. Here that is a CHoCH, the first sign of a trend change. In SMC terms, smart money is in.
Order Block (OB): the last down candle before the impulse up. By SMC logic, big players were building their position in this zone, and some of their orders may still be unfilled.
Price comes back into the OB. That is a retest, a second test of the zone. SMC explains it as a big player adding the rest of the position. For a trader it is an entry zone with a stop-loss just below the OB.
After the retest price bounces and heads up. That is the ideal scenario. In reality OBs often get broken straight through, so a stop-loss is a must: SMC is a model, not a guarantee.
Check yourself
- What is an Order Block?
Correct answer: The last opposite candle before an impulse. Before an impulse up, it is the last down candle. In SMC, big players’ orders remain there. - How does SMC explain price returning to an OB?
Correct answer: A big player adds the rest of the position. By SMC logic, a big player could not fill the whole size in one impulse and adds the rest on the retest. It is a model, not a law. - Per SMC, why does smart money take liquidity?
Correct answer: To get orders on the other side to enter. The crowd’s triggered stops turn into market sells. A big buyer takes them and builds size without pushing price up.