September 30, 2023
Smart Money Concept Trading Strategy

Smart Money Concept Trading Strategy

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Disclaimer: Note, The contents of this website are for personal research purposes only. They are not intended to be investment advice or a recommendation to buy or sell any security. You should consult with a financial professional before making any investment decisions.

Smart money concept trading strategy is the key to being successful in the forex market, it helps understand how to minimize losses and maximize profits, which is why I wrote this article about how to improve your trading skill using the smart money concept for forex trading.

We offer smart money concepts forex course free in our training group.
Before you can trade forex trading successfully using the smart money forex concept, you must first study and understand price action; this includes understanding what has happened in the forex market in the past (history of market structure), why it has happened, observing the current position of price action, and predicting the market’s next direction based on your observations.

If you truly understand price action and how to apply it, you will be among the few who can generate a consistent income from the Forex market.

How to Trade Forex using the Smart Money Concept Trading Strategy

Regardless of what you believe or your level of experience in the market, anyone with the right knowledge and attitude can make a living in the Forex market. In the forex market, we make decisions by studying and comprehending historical data such as:

High and lows in the market structure of a pair
Entry point
Point of Interest (POI)
Order Block
Exit point
Supply and demand zone
Support and resistance zones
Candlestick patterns
Chart patterns
Swing trades (High and low)
Market structure (or Break of structure forex BOS)
Risk-reward ratio
Trendlines and so on

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They are the fundamentals you must understand if you want to make a living from Forex trading. These appear to be simpler because you assume you understand them completely, but you must refine them before you can fully comprehend them.

What You Should Know About the Smart Money Concept Trading Strategy

A smart money concept trading strategy is a strategy based on price action.
It is the market concept used by the majority of institutional traders.
It enables traders to enter high-probability trades with the highest possible return on investment.
It reduces risk and allows traders to focus solely on trends.

Steps to Help You Trade the Smart Money Concept

You must read and pay close attention to what you are about to read from now on.
This is the concept that institutional traders use to make money, and you must decide on a good entry and exit point for your equity.

To begin, you should not risk more than 2% of your trading account on each trade, which means you should look for entries that do not risk more than 20 – 30 pips in stop loss.
Before you place any trade, you should ask yourself the following question: How do institutional traders or market makers place their trades? What factors influence their decision, and how do they manage risk?
We have two major kinds of entry positions in forex trading which are listed below.

Types of Entry Position in Trading Forex:

  1. Risk Entry: This is a type of entry in which you identify a point of entry (POE), wait for the price to reach your POE with pending orders, and then exit the trade at the opposing momentum.
    This type of entry is useful for trading trend reversals.
    When price action reaches a higher time frame point of interest, an order can be placed ( from either Supply and/ or Demand zone)
    Risk entry is an aggressive entry, but you must conduct research prior to placing the pending order.
  2. Confirmation Entry: This is a type of entry that necessitates analysis and confirmations from a different timeframe analysis matrix before placing any trade.
    The risk is low, but the rewards are high for this type of entry.
    Before making any trading decision, trades are analyzed from the higher timeframe Point of Interest to the lower timeframe Point of Entry.
    Do you need smart money concepts forex books?
    My previous post will guide you on order block-smart money concepts pdf
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5 Key Phases to Smart Money Concept Trading Strategy

Price is king! Momentum is king! These 5 key phases about to be discussed are to be used as confluence to both price and momentum and never in isolation.

  1. Consolidation Phase
  2. Expansion Phase
  3. Retracement Phase
  4. Reversal Phase
  5. Exit Phase
    Here they are;
  6. Consolidation Phase: A consolidation is a period of range-bound activity following a significant price move. Consolidation indicates the absence of a trend in a specific trading range. The price has “consolidated.”It frequently occurs following downtrends or uptrends and can be characterized as a period of indecision. Consolidation ends when the price breaks through existing support and resistance lines. During consolidation, you could have equal highs and lows before the breaks.
  7. Expansion Phase: It occurs when price moves quickly away from an equilibrium level, i.e. when price breaks out of consolidation.
    This equilibrium could be 50 percent of the high and low points of the consolidating phase.
    If the price moves quickly out of this area of consolidation, it will provide us with a place to enter a position and ride the trend.
    This could result in an order block, an imbalance, or a key level.
  8. Retracement Phase: This is when the price returns to the recently established price range. The price range will be the expansion out of the consolidation area in this case.
    After the price has expanded to either side of the consolidation phase, we must look for any inefficient price action that occurred during the quick move; this will provide us with an area where we can expect the price to retrace/pull back.
    As a result, we can identify any Point Of Interest (POI) where we can trigger trading orders where the price has mitigated price inefficiency which is the FVG (Fair Value Gap).
  9. Reversal Phase: When the price moves in the opposite direction of the current direction, this is called a reversal. The goal of the reversal is to seek out and remove any liquidity.
    Such liquidity as:
    Trend line liquidity
    Equal lows
    Equal highs
  10. Exit Phase: This is the time to exit the market with a profit. You must identify the weak points that your opponents are likely to exploit. When selling, you must exit at a point in the market where buyers are likely to dominate.
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The smart money concept trading strategy illustrated in this post should be back-tested until you fully understand it.
Pay attention to the Candlestick. The candlesticks are always speaking; listen, monitor, and adjust your position based on their movement. If you are unsure about the trend’s direction, wait for confirmation. Set a daily goal for yourself, and when you achieve it, you will gain confidence and discipline.
What can you use for smart money concepts forex indicator?
Identify Fair Value Gap and send me screenshots.
Thank you!

Disclaimer: Note, The contents of this website are for personal research purposes only. They are not intended to be investment advice or a recommendation to buy or sell any security. You should consult with a financial professional before making any investment decisions.