Smart Money Concepts Indicator - The Forex Geek (2024)

Author: The Forex Geek | Published: May 3, 2023

The Smart Money Concepts Indicator is a popular trading tool based on the concepts introduced by trader Inner Circle Trader (ICT). It consists of several features and strategies that traders can use to identify potential trade setups in the market. The indicator aims to help traders understand the behavior of smart money in the market, and to use that knowledge to make informed trading decisions. With its various signals and analysis tools, the Smart Money Concepts Indicator has gained a reputation for being a comprehensive and effective trading tool. In this article, we will take a closer look at the different features of the Smart Money Concepts Indicator and how traders can use it to enhance their trading strategies.

What is the Smart Money Concepts Indicator?

The Smart Money Concepts Indicator, also known as the SMC Indicator, is a comprehensive tool designed to simplify trading using Smart Money Concepts. It provides traders with a framework for identifying key market levels, order blocks, mitigation blocks, Fair Value Gaps, Liquidity concepts, and much more.

This all-in-one indicator displays real-time market structure, order blocks, premium & discount zones, equal highs & lows, and FVGs, allowing traders to automatically mark up their charts with widely used price action methodologies. The SMC Indicator contains alerts for almost all price characteristics, giving traders the ability to set alerts for specific price movements.

Smart Money Concepts Indicator Strategy

To use the Smart Money Concepts Indicator for trading, traders can use the following strategy:

1. Identify the market structure: The indicator allows traders to display historical or recent market structure levels, including break of structure (BOS), and change of character (CHoCH) levels. Traders can use this information to identify key support and resistance levels and determine the current market trend.
2. Identify swing points: The indicator displays swing points, such as higher high (HH), higher low (HL), lower low (LL), and lower high (LH). These points are important for identifying trend direction and potential entry and exit points.
3. Identify fractal points: The indicator displays fractal points such as PDH, PDL, PWL, PWH, etc. This can help traders to identify potential reversal points in the market. Traders can use this information to enter trades in the direction of the trend or to exit positions when the market is likely to reverse.
4. Identify order blocks: The indicator displays order blocks, which can help traders to identify areas of market interest, including supply and demand zones, accumulation and distribution areas, and stop-loss clusters. Traders can use this information to place trades with favorable risk-to-reward ratios and to manage their risk by setting stop-loss orders.
5. Customize the chart display: The indicator provides traders with a wide range of customization options, including the ability to set the color, size, and line width of different chart elements. Traders can customize the display to match their trading style and preferences.

Overall, traders can use the Smart Money Concepts Indicator to identify potential trading opportunities and manage their risk. Traders may use different variations or combinations of these signals based on their trading style and preferences. However, traders should always perform their own analysis and exercise caution when placing trades based on technical indicators.

Buy Signal

• Look for Order Blocks (OB) after a Change of Character (CHoCh) has formed. Traders may open a long position when price breaks above the OB with confirmation from the CHoCh and the indicator shows a bullish signal.
• Look for Fractal points to identify a potential reversal. Traders may open a long position when price breaks above the Fractal with confirmation from the indicator showing a bullish signal.
• Trade in the direction of the trend. Traders may open a long position when the indicator shows a bullish trend and the price is trending higher.

Sell Signal

• Look for Order Blocks (OB) after a Change of Character (CHoCh) has formed. Traders may open a short position when price breaks below the OB with confirmation from the CHoCh and the indicator shows a bearish signal.
• Look for Fractal points to identify a potential reversal. Traders may open a short position when price breaks below the Fractal with confirmation from the indicator showing a bearish signal.
• Trade in the direction of the trend. Traders may open a short position when the indicator shows a bearish trend and the price is trending lower

It is important to note that these are just possible signals and traders should always use their own analysis and judgement when making trading decisions. Additionally, traders may use different variations or combinations of these signals based on their trading style and preferences.

Smart Money Concepts Indicator Pros & Cons

Pros

• The Smart Money Concepts Indicator can help traders identify potential order blocks and changes in market character, which can provide valuable insights into market trends and potential trading opportunities.
• The indicator can also help traders identify potential reversals using fractal points, which can be useful for swing trading or trend reversal strategies.
• The indicator can be used across different markets and timeframes, making it versatile for different trading styles and preferences.
• The Smart Money Concepts Indicator is relatively easy to use and can be added to most charting platforms, which makes it accessible to traders of all skill levels.

Cons

• As with any technical indicator, the Smart Money Concepts Indicator is not 100% accurate and can provide false signals. It is important for traders to combine the indicator with other forms of analysis and risk management strategies.
• The indicator may not work as well in highly volatile or low liquidity markets, where price movements can be unpredictable.
• The Smart Money Concepts Indicator relies on historical data and may not accurately predict future market trends or movements.
• Traders may need to adjust their settings and parameters for the indicator based on the specific market and timeframe they are trading, which can require some trial and error.

Conclusion

In conclusion, the Smart Money Concepts Indicator is a useful tool for traders that helps identify potential changes in market trends and momentum. While it has its advantages, such as providing clear buy and sell signals, it also has some limitations, such as false signals and the need for traders to interpret the signals in the context of other market factors. Ultimately, the effectiveness of the indicator depends on the skill and experience of the trader using it, as well as their ability to apply sound risk management principles.