{"term":{"slug":"smart-money-concepts","term":"Smart Money Concepts (SMC)","definition":"A trading framework based on the theory that institutional traders (smart money) leave detectable footprints in price action through order blocks, fair value gaps, liquidity sweeps, and market structure shifts. Also called ICT methodology.","extendedExplanation":"Smart money concepts (SMC) is a trading approach popularized by ICT (Inner Circle Trader) that models how institutional participants execute large orders. The core idea: institutions cannot buy or sell millions of dollars instantly without moving the market, so they use specific price action patterns to accumulate and distribute positions.\n\nThe key SMC concepts for prop firm traders:\n1. Order Blocks: Zones where institutions placed large orders, creating support/resistance\n2. Fair Value Gaps (FVG): Imbalances in price delivery that tend to get filled\n3. Breaker Blocks: Failed order blocks that become reversal zones\n4. Liquidity Sweeps: Stop hunts that trigger orders before reversing\n5. Market Structure Shifts: Break of structure (BOS) and change of character (CHOCH)\n\nFor prop firm trading, SMC provides clear entry and exit criteria with tight stop-losses, which is critical for managing drawdown. The framework works best on higher timeframes (15m, 1H, 4H) for swing and day trading. Scalpers using SMC on 1m-5m charts face more noise and false signals.","exampleWithNumbers":"A swing trader on FTMO $100K uses SMC: identifies a bullish order block on the 1H chart at 1.0850 EUR/USD, with a fair value gap between 1.0860-1.0875. Price sweeps liquidity below 1.0845 (below the order block), then reclaims. Entry at 1.0855, stop at 1.0835 (20 pips). Target: 1.0920 (65 pips). Risk: $200 per lot. At 1 lot, $200 risk against the $5,000 daily loss limit = 4% of daily budget. R:R = 1:3.25.","category":"strategy","relatedTerms":["order-block","fair-value-gap","liquidity-sweep","breaker-block"]},"_links":{"self":"https://runvigil.app/api/glossary/smart-money-concepts","page":"https://runvigil.app/learn/smart-money-concepts","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}