📈 Smart Money Concepts (SMC)

Smart Money Concepts (SMC) is a price-action methodology built on a simple idea: large institutional orders can't hide. When a big player moves a market quickly, they leave footprints — a break in the market's structure and a price 'gap' the market tends to revisit. SMC traders wait for those footprints, then join in the same direction when price comes back to fill them.

Instead of indicators, SMC reads the raw structure of the chart: where the swing highs and lows are, which ones broke, and where price moved so fast that it left an imbalance behind.

How the strategy works

1. Establish the trend on the 1-hour chart by finding a break of market structure (BOS) — price taking out a meaningful swing high or low.
2. Locate a fair value gap (FVG): a three-candle pattern where price moved so fast it left an unfilled imbalance.
3. Wait for price to pull back and retest that gap — patience is most of the edge.
4. Enter only when a confirmation candle closes back inside the gap in the trend's direction.
5. Place the stop-loss beyond the swing (or beyond the gap), and target a fixed reward-to-risk multiple, typically 1:2 to 1:4.

When it shines — and when it doesn't

SMC works best in trending intraday markets with clean structure — crypto majors and the big FX pairs are the classic hunting grounds. In choppy, directionless conditions, structure breaks stop meaning anything and the strategy correctly goes quiet.

It's a selective strategy by design: few trades, but each one demands trend, gap, retest, and confirmation to line up at once. Expect days with no signals — that's the filter working, not the strategy failing.

Key terms

Break of structure (BOS)

Price taking out a prior swing high or low, signalling the trend's direction.

Fair value gap (FVG)

An imbalance left by a fast move — a gap between candle 1's high and candle 3's low (or vice versa) that price tends to revisit.

Retest

Price returning to a level (here, the FVG) before continuing — the entry zone.

R (reward:risk)

Profit measured in multiples of what you risked. A 1:3 trade wins 3R or loses 1R.

How to judge it

Because SMC fires rarely, raw signal count tells you nothing. Judge it on net R (total profit in risk multiples) and profit factor (gross wins ÷ gross losses) over a meaningful sample — Poshkan's built-in backtest replays the exact rules over ~8 weeks of 5-minute data so you can see both before enabling it.