Smart Money Concepts & ICT Strategy Guide
Retail indicators lag. Learn how banks and institutions move prices through Order Blocks, Fair Value Gaps, and Liquidity Sweeps.
01. Mapping Institutional Order Blocks
Order Blocks represent price zones where financial institutions placed massive buy or sell block orders. When price aggressively breaks out, it leaves behind unfilled orders. Retail traders look to buy or sell when price returns to mitigate these zones.
A bullish order block is defined as the lowest down-close candle before a rapid upward expansion that breaks market structure. Identify these zones on higher timeframes (1H/4H) and wait for price to return to the zone before taking action.
02. Identifying Fair Value Gaps (FVG)
A Fair Value Gap is a market inefficiency where price moves rapidly in one direction without giving buyers or sellers enough opportunity to trade. This creates a gap in price delivery that acts like a magnet, drawing price back to fill the void.
An FVG is mapped across three consecutive candles. In a bullish FVG, look for a large middle green candle. The gap exists between the high of the first candle and the low of the third candle. Mitigation occurs when price trades back down into this range.
03. Backtesting SMC Checklist Rules
To build a robust Smart Money system, you must backtest a strict rule-based checklist. First, identify higher timeframe market bias. Second, locate key HTF order blocks or unfilled FVGs. Third, wait for a lower timeframe liquidity sweep (e.g., taking out daily highs or lows).
Once the sweep occurs, look for a Change of Character (CHoCH) on the 1-minute or 5-minute charts, indicating structure has shifted. Enter limit orders at the local LTF FVG, using a tight stop loss below the sweep low for maximum risk-to-reward metrics.