And Why Is It So Popular?
By Your Trading Mentor,
THE MENTOR TO YOUR MENTOR?
SMC or Smart Money Concepts Trading has been getting a lot of attention recently as a popular trading style. It’s based on the trading method of the Inner Circle Trader or ICT, the trader who calls himself the mentor to your mentor. Originally I was sceptical but to be honest I recently joined (the cult?) myself and am a huge fan. So although I call myself your trading mentor, as ICT has taught me a lot of my new favourite tricks and strategies and my newest and most favourite strategy is based on his concepts, I will allow him to call himself the mentor to your mentor! That being said the videos are very long and the full course is not for the faint hearted so I thought I would write a little blog post on Smart Money Concepts Trading and why it is so popular.
If you’d like to get a little deeper into this and see some examples of me trading Smart Money Concepts style then there are plenty of videos up on Trading Angel’s YouTube channel
What is SMC?
Smart money trading is a concept that refers to the trading strategies used by financial institutions and large investors to make profits in the financial markets. These traders have access to more information and resources compared to individual retail traders, which gives them an edge in the markets. Smart money trading is all about following the moves made by the big players in the market and using that knowledge to make profitable trades.
The term “smart money” refers to the institutional investors, hedge funds, and other large investors who have deep pockets and extensive resources to research and analyse market trends. Smart money traders have a significant influence on the financial markets because they are responsible for a substantial portion of the trading activity. These traders use advanced technologies, such as algorithmic trading and machine learning, to gain an edge in the market.
One of the key concepts of smart money trading is to follow the trend. Smart money traders look for trends in the market and follow them. They believe that the trend is their friend and that it is easier to make money by following the trend rather than trying to predict it. Trend-following strategies are popular among smart money traders because they can be more reliable than other trading strategies.
Another key concept of smart money trading is to use technical analysis. Smart money traders use technical indicators to identify potential trading opportunities. Technical analysis involves using charts and other tools to analyse market trends and make trading decisions. Technical analysis can be used to identify potential support and resistance levels, which can be used to make trading decisions.
Smart money traders also pay close attention to market news and events. They monitor economic indicators, such as GDP, inflation, and employment data, to get a sense of the overall health of the economy. They also keep an eye on political and geopolitical events that could impact the financial markets. By staying informed about market news and events, smart money traders can make better-informed trading decisions.
In conclusion, smart money trading is all about following the moves made by the big players in the market, using technical analysis, and staying informed about market news and events. Smart money traders have an edge in the market because they have access to more information and resources compared to individual retail traders. While individual traders can learn from the strategies used by smart money traders, it is important to remember that these traders have a higher risk tolerance and more significant resources, which makes their trading strategies different from those used by individual traders.
Why is smart money concepts trading so popular?
In recent years, smart money trading has become increasingly popular among investors and traders. This is because smart money traders have a proven track record of generating consistent profits in the financial markets. In this blog post, we will explore the reasons why smart money concepts trading is so popular.
1. Access to sophisticated technology and resources
Smart money traders have access to advanced trading technologies and resources that individual retail traders do not. They use powerful computers and algorithms to analyze market trends and make trading decisions. They also have access to exclusive research and analysis from top financial institutions, which allows them to make informed trading decisions.
2. Ability to move the markets
Smart money traders have a significant impact on the financial markets. They are responsible for a large portion of the trading activity, and their buying and selling decisions can move the markets. Retail traders do not have this kind of influence on the markets, which makes it more difficult for them to generate consistent profits.
3. Focus on long-term profitability
Smart money traders have a long-term focus when it comes to trading. They are not interested in making short-term gains or taking unnecessary risks. Instead, they focus on generating consistent profits over the long-term. This approach to trading is more sustainable and less risky than the short-term focus of many individual traders.
4. Use of advanced trading strategies
Smart money traders use advanced trading strategies that are not commonly used by individual retail traders. They use technical analysis, trend-following strategies, and other sophisticated trading techniques to identify potential trading opportunities. These strategies have been proven to be effective in generating consistent profits in the financial markets.
5. Diversification of portfolio
Smart money traders are known for their diversified portfolios. They invest in a wide range of assets, such as stocks, bonds, commodities, and currencies. This diversification reduces their overall risk and helps them to generate consistent profits even in turbulent market conditions.
Smart money concepts trading is popular because it offers investors and traders a proven way to generate consistent profits in the financial markets. Smart money traders have access to advanced technology and resources, have the ability to move the markets, focus on long-term profitability, use advanced trading strategies, and have diversified portfolios. While individual traders can learn from the strategies used by smart money traders, it’s important to remember that these traders have a higher risk tolerance and more significant resources, which makes their trading strategies different from those used by individual traders.
Here is a trading plan for a smart money concepts day trading strategy:
1. Identify the Trend: The first step is to identify the trend of the market. Smart money traders believe that the trend is their friend, so it’s important to determine whether the market is in an uptrend, downtrend, or ranging. Use technical analysis tools like moving averages, trend lines, and support and resistance levels to identify the trend.
2. Identify the Key Levels: Once you have identified the trend, the next step is to identify the key levels. These are the levels where smart money traders are likely to enter or exit positions. Look for support and resistance levels, pivot points, and other key levels that are relevant to the trend.
3. Monitor Market News and Events: Smart money traders are always aware of the latest market news and events. Keep an eye on economic data releases, company earnings reports, and other events that could impact the market. This will help you to make informed trading decisions.
4. Use Technical Analysis: Use technical analysis to identify potential entry and exit points. Look for patterns, such as breakouts or pullbacks, that indicate a potential trend reversal or continuation. Use technical indicators, such as RSI, MACD, and Stochastics, to confirm your analysis.
5. Risk Management: Smart money traders always have a risk management plan in place. Set stop-loss orders to limit your losses if the trade goes against you. Use position sizing to ensure that each trade is a small percentage of your overall trading capital.
6. Monitor the Order Book: Smart money traders pay close attention to the order book. They look for large orders or clusters of orders that could indicate the presence of smart money traders. Keep an eye on the order book to identify potential entry and exit points.
7. Exit the Trade: Finally, exit the trade when the market conditions change or your trading plan dictates. Use technical analysis, market news, and your risk management plan to determine when to exit the trade.
A smart money concepts day trading strategy involves identifying the trend, key levels, and market news and events. Use technical analysis to identify potential entry and exit points, and have a risk management plan in place. Monitor the order book for potential entry and exit points, and exit the trade when the market conditions change or your trading plan dictates. By following these steps, you can increase your chances of success as a smart money trader.
FOR A BIT OF BALANCE…
While trading using smart money concepts can be effective, there are also some potential disadvantages to consider:
1. Limited Market Coverage: Smart money concepts typically focus on a limited number of stocks or assets that are heavily traded by institutional investors. This approach may limit your exposure to a broader range of investment opportunities.
2. Timing: Smart money concepts often involve tracking changes in institutional ownership or monitoring insider buying and selling. These activities can be time-consuming and may require constant monitoring to identify profitable opportunities.
3. Risk Management: Investing based on smart money concepts can pose risks if you do not have a solid risk management strategy. The actions of institutional investors or insiders can be unpredictable, and there is always the possibility of unexpected market events that can impact your investment.
4. Information Availability: Access to the same information as institutional investors or insiders can be challenging for retail investors. While there are many sources of information available, it can be difficult to determine which sources are reliable and which are not.
5. High Transaction Costs: Trading based on smart money concepts may involve frequent buying and selling of stocks, which can result in high transaction costs. These costs can eat into your profits and make it more difficult to generate returns that are competitive with institutional investors.
There are many more elements to trading smart money concepts which haven’t been included here but if you’d like to get a little deeper into this and see some examples of me trading Smart Money Concepts style then there are plenty of videos up on Trading Angel’s YouTube channel
Until next time, Happy Trading!
Love From, Your Trading Mentor
Trading Angel x