SMC Ultimate Guide • Smart Money Concepts Page 1

SMART MONEY CONCEPTS • VISUAL EDITION

The Complete SMC

Trading Guide
With Candlestick
Examples
Every concept shown with real chart examples — candlesticks, market moves,
zones, sweeps, and full trade setups drawn for you.

■ Bullish candle ■ Bearish candle ■ Order Block ■ Sweep / IDM

01 Market Structure

02 Break of Structure (BOS)

03 Change of Character (CHoCH)

04 Fair Value Gap (FVG)

05 Order Block (OB)

06 Liquidity & Sweeps

07 Inducement (IDM)

08 Premium & Discount

09 Previous Day High / Low

10 Full Trade Setup

SMC Ultimate Guide • Smart Money Concepts Page 2

◆ 01 ■ Market Structure – The Foundation

Market structure is the skeleton of price. Price moves in a series of swing highs and lows. In an
uptrend it makes Higher Highs (HH) and Higher Lows (HL). In a downtrend it makes Lower Highs
(LH) and Lower Lows (LL). Everything else in SMC is built on this.
• HH + HL → Bullish structure (bias = look to buy pullbacks)
• LH + LL → Bearish structure (bias = look to sell rallies)
• Always identify the last swing High and swing Low before entering any trade.
• HTF (Daily/4H) gives the trend; LTF (15m/5m) gives the entry timing.

135
■ Example: Bullish Structure (HH/HL) → Bearish Flip (LH/LL)
LH LH
HH HH

125 HL
HH
HH LL
HL
LH LH
114 HL
LL
LL LL
HL

103

LL

93

Price forms HH→HL→HH→HL in the bullish phase, then flips to LH→LL after structure breaks.

■ Pro Tip: Start every analysis by marking the last 3 swing highs and lows on the 4H chart.
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◆ 02 ■ Break of Structure (BOS)

A BOS occurs when a candle closes beyond a previous swing high or low, confirming the trend
continues. It is a continuation signal — smart money is pushing further in the same direction. After a
BOS, wait for a pullback into an OB or FVG to join the move.
• Bullish BOS: Candle closes above previous swing High → uptrend confirmed.
• Bearish BOS: Candle closes below previous swing Low → downtrend confirmed.
• The candle body must close beyond the level — wicks alone don't count.
• After BOS, the broken swing point flips to support (bullish) or resistance (bearish).

134
■ Example: Break of Structure — Price closes above Swing High

BOS ✓
BOS
124

Swing High

114

104

94

Dashed line = Swing High. When price closes above it, BOS is confirmed → look for pullback entry.

■ Pro Tip: Don't chase BOS immediately. Wait for a pullback into the discount OB/FVG created by
the move.
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◆ 03 ■ Change of Character (CHoCH)

CHoCH is the first sign of a reversal. It breaks the OPPOSITE side of current structure. In a
downtrend, breaking above a Lower High = CHoCH (possible reversal up). Think of CHoCH as 'the
trend is now questioning itself' — confirmation comes with a BOS in the new direction.
• Bullish CHoCH: In downtrend, price closes above a Lower High → reversal warning.
• Bearish CHoCH: In uptrend, price closes below a Higher Low → reversal warning.
• CHoCH ≠ reversal confirmed. Wait for a BOS in the new direction before going big.
• Best CHoCH entries: CHoCH on 15m/1H inside a HTF OB/FVG pullback.

136
■ Example: CHoCH — Downtrend broken, reversal begins

128 LH

CHoCH!
CHoCH
Last Lower High LH
120 LL

113

105

Downtrend (LH/LL) flips when price closes above the Last Lower High → CHoCH → bullish BOS follows.

■ Pro Tip: CHoCH = alert. BOS in new direction = confirmation. Never enter on CHoCH alone.
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◆ 04 ■■ Fair Value Gap (FVG)

A Fair Value Gap is a 3-candle imbalance. Candle 1's high and Candle 3's low don't overlap (bullish
FVG) — price moved so fast it left a gap. Institutions left unfinished orders inside it. Price typically
returns to fill this gap before continuing.
• Bullish FVG: C1 High < C3 Low → shaded gap is support zone.
• Bearish FVG: C1 Low > C3 High → shaded gap is resistance zone.
• The 50% midpoint of the FVG is the ideal entry (best risk-reward).
• FVGs right after a BOS or CHoCH are the most powerful (institutional displacement FVGs).
• Higher TF FVGs (4H, Daily) are magnets — price will almost always revisit them.

138
■■ Example: Fair Value Gap — 3-candle imbalance, price fills then bounces

126

Bounce

114 C3 Low
FVG (IMBALANCE)
Fills FVG
C1 High

102

90
C1 High=107 C2 (impulse) C3 Low=114

Gold zone = FVG (imbalance). Price pulls back to fill it, bounces from the zone and continues up.

■ Pro Tip: If price aggressively moves away from an FVG without filling it, the FVG is stronger,
not weaker.
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◆ 05 ■ Order Block (OB)

An Order Block is the last opposing candle before a strong move. It's where institutions placed
their bulk orders. When price returns to this zone, those remaining orders trigger again — creating a
high-probability bounce. The OB zone is the candle's open-to-close range (the body).
• Bullish OB: Last bearish (red) candle before a strong bullish impulse.
• Bearish OB: Last bullish (green) candle before a strong bearish impulse.
• The OB must cause a BOS or CHoCH to be valid — otherwise it's just a random candle.
• First touch of OB is the strongest — it weakens with repeated visits.
• If an FVG sits inside the OB, this is called a Propulsion Block — extremely high probability.

141
■ Example: Order Block — Last bearish candle before impulse, price returns & bounces

133

124 Returns to OB Mitigates OB

OB

ORDER BLOCK (OB) ZONE

115 Last bearish candle

107

Orange zone = OB (last bearish body before impulse). Price returns, mitigates the OB, then launches.

■ Pro Tip: Draw OB zones with dotted borders. When price enters the zone, drop to LTF and look
for CHoCH.
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◆ 06 ■ Liquidity & Sweeps

Liquidity = where stop losses sit. Institutions need it to fill massive orders. They engineer price to
sweep liquidity (grab stops) before the real move. Retail traders' stops above highs (BSL) and below
lows (SSL) are the fuel institutions use.
• Buy-Side Liquidity (BSL): Clusters above swing highs, equal highs, PDH, session highs.
• Sell-Side Liquidity (SSL): Clusters below swing lows, equal lows, PDL, session lows.
• Equal Highs / Equal Lows: Two or more highs/lows at the same level = liquidity magnet.
• After a sweep, look for a sharp reversal candle + CHoCH — that's the entry signal.
• Trend = price moves from one liquidity pool to the next (SSL → BSL → SSL).

138
■ Example: Equal Highs Swept (BSL) → Sharp Reversal
Liquidity
SWEEP Swept!

125
BSL (Stop LossesEQH
above EQH) EQH

112

True Move Down

100

87

Equal Highs (EQH) form BSL above. Purple candle sweeps them. Sharp reversal follows — true move down.

■ Pro Tip: Ask yourself before every trade: 'Where is the liquidity?' Trade AFTER the sweep,
never before.
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◆ 07 ■ Inducement (IDM)
Inducement is a false liquidity target that forms during a pullback. It looks like a real breakout level,
luring retail traders in — then price sweeps it, collecting their stops, before launching in the true
intended direction. IDM always precedes the real entry zone (OB/FVG).
• IDM forms during a retracement as a minor swing high (in bullish) or swing low (in bearish).
• Retail traders place breakout orders at IDM → price sweeps them → OB entry appears below.
• Pattern: Trend impulse → pullback → IDM forms → IDM swept → OB/FVG entry → true move.
• IDM is always on a lower time frame relative to the OB you're targeting.
• The deeper the IDM sweep, the stronger the subsequent move from OB.

132
■ Example: Inducement swept → real entry at OB → bullish launch

Target
True Move
122
HH
IDM
IDM Level
112
Sweeps IDM
OB Entry

103
IDM Swept

93

Pullback forms IDM (purple). Price sweeps it (purple candle), finds OB, then launches to true target.

■ Pro Tip: If price creates a minor swing during pullback that seems 'too obvious' to trade — it's
IDM. Skip it.
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◆ 08 ■■ Premium & Discount Zones

Smart money buys cheap and sells expensive. Use a Fibonacci from the last swing low to swing high.
The 50% line is equilibrium. Below 50% = Discount (buy zone). Above 50% = Premium (sell zone).
This filter stops you from buying at the top and selling at the bottom.
• Draw Fib from Swing Low (0%) to Swing High (100%) — or vice versa for bearish.
• Discount zone (0–50%): Below equilibrium → ideal for LONG entries.
• Premium zone (50–100%): Above equilibrium → ideal for SHORT entries.
• The best OBs/FVGs to trade are those sitting in the Discount (bullish) or Premium (bearish).
• In a bullish trend, never buy in premium — wait for price to pull into discount first.

141
■■ Example: Premium (SELL zone) vs Discount (BUY zone) using 50% EQ

Sell here
↑ premium
Swing High PREMIUM — Look to SELL
128

↓ discount
115
50% Equilibrium Buy here

102
DISCOUNT — Look to BUY

89

Red zone = Premium (sell). Green zone = Discount (buy). Gold dashed line = 50% Equilibrium.

■ Pro Tip: Patience is the skill here. If price hasn't reached the discount zone, simply wait. No
setup = no trade.
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◆ 09 ■ Previous Day High / Low (PDH / PDL)

PDH and PDL are key institutional reference levels. Algorithms target them at session opens. A
sweep of PDL in a bullish market = institutions grabbed SSL, now price reverses up to PDH. This
gives you a clear entry trigger and target in one setup.
• PDH = previous day's highest point → BSL rests above it.
• PDL = previous day's lowest point → SSL rests below it.
• During London Open (2–5 AM EST) or NY Open (8:30–11 AM EST), watch for the sweep.
• Pattern: Sweep PDL → CHoCH on 5m/15m → enter at OB → target PDH.
• Also watch: Previous Week High/Low (PWH/PWL) on the 4H/Daily for bigger setups.

136
■ Example: New day sweeps PDL → Reversal → Rallies to PDH

→PDH target PDH Hit

126
PDH = 124

116
CHoCH
Sweeps PDL

PDL = 107
106
PDL Swept

96
Prev Day PDH=124 PDL=107 New Day

PDL swept at session open (purple candle) → CHoCH on LTF → price rallies all the way to PDH.

■ Pro Tip: Mark PDH and PDL every day before the session opens. These are your first bias
levels.
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◆ 10 ■ Full Trade Setup — All Concepts Combined

This is how all SMC concepts work together in one trade. The chart below shows a complete
institutional trade from start to finish: bias → IDM trap → sweep → CHoCH → OB entry → target.
• Step 1 – HTF Bias: 4H structure is bullish (HH/HL) → bias = long only.
• Step 2 – IDM: Pullback creates a small swing high (IDM) — retail buys the breakout.
• Step 3 – Sweep: Price dips lower, sweeps SSL + IDM (collects stop losses).
• Step 4 – CHoCH: After the sweep, price breaks above a recent high on 15m → reversal
confirmed.
• Step 5 – OB Entry: Price returns to the OB formed during CHoCH displacement.
• Step 6 – Target: Stop below OB, target the next BSL (equal highs / prior swing high).
• Risk:Reward on SMC setups typically ranges from 1:3 to 1:10.

143
■ Full Setup: IDM Sweep → CHoCH → OB Entry → BSL Target

BSL Target
BSL
131

119 IDM
IDM SSL Sweep
CHoCH
OB Entry

OB
107

95
HTF Uptrend IDM CHoCH Entry Target

Complete SMC trade: IDM swept → CHoCH → OB entry (orange zone) → price targets BSL above.

■ Pro Tip: One perfect setup per day is enough. Master the pattern, then execute with discipline.

Quick Reference Cheat Sheet

Concept Bullish Signal Bearish Signal Action

BOS Closes above HH Closes below LL Trend continues — join it

CHoCH Breaks above LH Breaks below HL Reversal warning — prepare

FVG Gap below price Gap above price Re-entry zone on pullback

OB Last red candle before up Last green before down Entry at first touch

Liquidity BSL above highs SSL below lows Trade AFTER the sweep

IDM Fake high swept Fake low swept Wait — real entry follows

Prem/Disc Buy below 50% Sell above 50% Filter for quality entries

PDH/PDL PDL swept → buy PDH swept → sell Session open trigger
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■ Mastery comes from screen time and journaling every trade. Apply this framework consistently —
quality setups over quantity.