SMC – Smart Money Concepts

Full Form: Smart Money Concepts

Definition: A trading methodology that focuses on identifying and following the footprints of institutional traders (smart money) in the market.

Practical Meaning: SMC traders look for specific patterns in price action, volume, and order flow that suggest institutional activity. This includes concepts like liquidity grabs, order blocks, and break of structure. For example, when price makes a sudden move to take out stops below a support level before reversing, this is often interpreted as smart money accumulating positions.

Usage: Traders use SMC to align with institutional order flow rather than trade against it. Common mistakes include overcomplicating the analysis or ignoring higher timeframe context.

SMT – Smart Money Technique

Full Form: Smart Money Technique

Definition: Specific trading strategies derived from Smart Money Concepts that focus on institutional trading behaviors.

Practical Meaning: SMT includes techniques like liquidity grabs, stop hunts, and order block trading. For instance, after a strong move up, smart money might push price slightly beyond a recent high to trigger breakout traders’ stops before reversing.

Usage: These techniques help traders identify optimal entry points where institutions are likely accumulating positions. Beginners often mistake retail breakouts for valid SMT setups.

BOS – Break of Structure

Full Form: Break of Structure

Definition: When price moves beyond a clearly defined market structure point, indicating potential continuation of the trend.

Practical Meaning: In an uptrend, a BOS occurs when price breaks above the last significant high. For example, if price makes higher highs and higher lows, then breaks above the most recent swing high with conviction, this confirms the uptrend is intact.

Usage: Traders use BOS for trend confirmation and entries. A common mistake is trading every small break without considering the context of higher timeframe structure.

FBOS – False Break of Structure

Full Form: False Break of Structure

Definition: When price appears to break a market structure but quickly reverses, often trapping traders on the wrong side.

Practical Meaning: An FBOS might occur when price breaks below a swing low in an uptrend, only to reverse sharply upward. This is often a liquidity grab by institutions before the trend resumes. For example, price breaks below support, triggers stops, then rallies strongly.

Usage: Experienced traders watch for FBOS as potential reversal signals. Beginners often get caught in FBOS by entering too early without confirmation.

CHOCH – Change of Character

Full Form: Change of Character

Definition: A shift in market behavior that suggests a potential trend change or significant pullback.

Practical Meaning: In an uptrend, a CHOCH might appear as price making a lower high after a series of higher highs, or breaking structure without the typical pullback. For example, if price has been making higher highs with shallow retracements, then suddenly makes a deep retracement, this signals character change.

Usage: Traders use CHOCH to anticipate trend reversals or exits. A common mistake is interpreting every small pullback as CHOCH without volume confirmation.

IDM – Internal Dealer Market

Full Form: Internal Dealer Market

Definition: The hidden market where institutional orders are matched before being shown to the public market.

Practical Meaning: Large institutions often match orders internally to avoid moving the market. For retail traders, signs of IDM activity might include large orders being filled without significant price movement, or sudden liquidity appearing at certain levels.

Usage: Advanced traders watch for IDM clues in the order book. Beginners often overlook this concept entirely.

OB – Order Block

Full Form: Order Block

Definition: A price zone where significant institutional orders were previously executed, often becoming future support/resistance.

Practical Meaning: An OB forms when price makes a strong move away from a consolidation area, leaving unfilled orders behind. For example, after a large buy order executes, the price range where it occurred often acts as future support.

Usage: Traders watch for price reactions at OBs for potential entries. Common mistakes include drawing OBs too large or ignoring their time relevance.

OF – Order Flow

Full Form: Order Flow

Definition: The real-time flow of buy and sell orders in the market, showing the actual supply and demand dynamics.

Practical Meaning: Order flow analysis examines the sequence, size, and aggressiveness of orders. For example, large buy orders hitting the ask price consistently suggests strong demand. Tools like footprint charts or time and sales data help visualize order flow.

Usage: Traders use OF to confirm entries/exits and gauge market strength. Beginners often focus only on price without considering the order flow behind moves.

FVG – Fair Value Gap

Full Form: Fair Value Gap

Definition: A price range that was skipped over during a strong move, creating an imbalance that often gets filled later.

Practical Meaning: FVGs form when price makes a large move in a short time, leaving a gap in the auction process. For example, if price jumps from $100 to $103 without trading at $101-102, this zone becomes an FVG that often acts as support/resistance later.

Usage: Traders watch for price returns to FVGs for potential entries. Common mistakes include trading every FVG without considering the context.

IMB – Imbalance

Full Form: Imbalance

Definition: A price area where buying and selling pressure were unequal, creating a void in the auction process.

Practical Meaning: Similar to FVG but more subtle, imbalances show where one side dominated trading. For example, if price moves up rapidly on large buy orders with little selling pressure, this creates a buying imbalance that may get filled later.

Usage: Traders watch for price returns to imbalances for potential reversals or continuations. Beginners often confuse imbalances with regular support/resistance.

POI – Point of Interest

Full Form: Point of Interest

Definition: A specific price level that has shown significance in the past and is likely to influence future price action.

Practical Meaning: POIs include swing highs/lows, volume nodes, or other technically significant levels. For example, a previous resistance level that price reacted to multiple times becomes a POI for future trading decisions.

Usage: Traders mark POIs on their charts to anticipate potential reactions. Common mistakes include marking too many POIs or ignoring their time relevance.

Example Code: Marking a POI on Chart

// Pseudo-code for marking a POI on trading chart
function markPOI(priceLevel, chart) {
    const poi = {
        price: priceLevel,
        color: '#FF6B6B',
        lineStyle: 'dashed',
        width: 2,
        label: {
            text: 'POI: ' + priceLevel,
            color: '#2C3E50',
            fontSize: 12
        }
    };
    chart.addHorizontalLine(poi);
}

// Example usage - mark previous swing high as POI
const previousHigh = getSwingHigh(chart);
markPOI(previousHigh, chart);