Debunking Smart Money Concepts Trading Strategies

[00:00] and Smart Money Concepts, or SMC in short,  is one of the dumbest things I have seen. Unfortunately, Smart Money Concepts  has a blind mob-like following. So,  

[00:14] if you tell SMC traders that they are wrong,  you might get kidnapped and thrown off a bridge. But you guys bullied me into making this  video, and SMC traders are wrong. The only   reason I was delaying this video is because,  even if Smart Money Concepts are mostly crap,  

[00:29] no one was getting hurt. But I was wrong. I  saw multiple Patreon supporters get confused   by SMC because it's advertised in a very  misleading way. Look at this Reddit user,   for example. They think SMC is different  from Price Action even though it's not.  

[00:44] Since I traded Price Action Only for  thousands and thousands of hours,   when I first heard about Smart Money  Concepts, my reaction was something like this.

[00:59] I bet most price action traders also  had a similar reaction because SMC   really is just classic price action  rebranded as an overcomplicated thing. At one point, I even saw someone  say Smart Money Concepts came first,  

[01:12] and Price Action traders copied them. It's  true that Smart Money Concepts have existed   for more than 10 years now. The earliest Smart  Money Concept Post I could find was from around   2010 on a site called Babypips. But even on  this site, experienced traders were quick  

[01:27] to point out that it's just classic price  action with a different name. That's because   Price Action Strategies have been seen in  books published more than 50 years ago. Richard Schabacker's "Technical Analysis  and Stock Market Profits" was published  

[01:41] in 1932. This book is considered  an influential work in the price   action field. It shows various patterns  and market indicators and shows how to   analyze price movements without  the use of additional indicators.

[01:54] The price action technical analysis that we are  more familiar with today became more popularized   from around the 1970s onwards. That was way before  most Smart Money Concept traders were born. So,  

[02:06] no, Price Action did not copy the Smart Money  Concepts; it's most likely the other way around. According to this Reddit user, it's clever  marketing. If you name something a price   action trading course, no one will buy  it nowadays because people already know  

[02:19] it. But renaming the courses to Smart Money  Concepts and other dumb things makes millions. But why do some SMC traders strongly  believe it's different than price action? I spent hours gathering data and found that  many beginner traders who started trading  

[02:35] after the year 2020 had a higher-than-normal  chance of stumbling upon Smart Money Concepts   instead of Classic Price Action. This is  because SMC, like many other concepts,   gained more attention when interest  in trading increased overall after  

[02:51] the lockdowns. Even your neighbor's dog  was day trading during this time. Then,   more people started remaking SMC  videos, resulting in more attention. They explained Smart Money Concepts  as if they show something smart,  

[03:05] But do you remember when you were 3  years old, new to the game of life,   and believed Santa was real? Pull his beard,  kid; it's the same grandpa you see every day.

[03:18] Just like that, when we are new to the game of  trading, we believe many things trading gurus   tell us. We draw stupid lines everywhere because  we lack trading experience, and everything looks   like support resistance to us. This same lack  of trading experience can make many beginner  

[03:34] traders believe that some of these drawings  show smart things, like mentioned in Smart   Money Concepts. Once you gain enough experience,  it becomes very clear that most of these patterns   are total crap made up by your mind, and the  rest are all classic price action patterns.

[03:49] But then why do some traders say that Smart  Money Concepts work for them? It's simple!   Since SMC traders are just trading  the classic price action, in the end,   it's the classic price action that's working  for them. If you name your boat a plane,  

[04:04] This makes SMC sound good, but remember,  the whole problem with SMC is that it is   hurting some beginner traders because  of the unnecessarily complicated names  

[04:16] used. Calling a car "a car" is much easier to  understand than giving it a misleading name. Meet this Reddit user who spent 4 months  studying Smart Money Concepts. Let's call  

[04:31] trading strategies and found many people making  profits with SMC. But that's not the main thing   that got their attention. It was the higher  accuracy analysis SMC traders were doing.

[04:44] Then, Bill found more people who claimed to  have made money with SMC. After looking at   all these positive reviews, Bill decided to  try it! Even though Bill struggled initially,  

[04:56] But most importantly, Bill felt like  a blindfold was removed and they were   seeing how the markets really moved for  the first time. It was like, "I understand  

[05:08] every movement now." That was the case until  they gained 4 months of experience with it. realised Institutional Orderflow was oddly  similar to just regular trend trading.  

[05:23] Institutional Sponsorship was pretty much  just strong levels of Support Resistance. Terms like "Internal External runs" were just  sudden price moves and pullbacks in lower   timeframes. "Low resistance liquidity runs,"  which are the soul of Smart Money Concepts,  

[05:40] Then, Bill did some more research  and realized that most of the Smart   Money Concepts are truly normal  concepts with different names.

[06:10] "Breaker Blocks" are literally just support  turning into resistance. They also found   how toxic the SMC community is. They saw  how strongly some people believe in the   smart money concept like it's a secret thing  only they know. The community also doesn't  

[06:26] like when people point out they are wrong  and when others use different strategies. patterns even though they themselves  use the same thing with different names.

[06:41] Bill thinks that if you show a chart to an SMC  and a normal price action trader at the same time,   they both would likely take the same entries,  but a normal price action trader will call it   a "bullish engulfing entry at support", and an  SMC trader would say, "they saw institutions  

[06:56] manipulate equal lows grabbing liquidity to  fill their orders followed by a propulsion   block that creates displacement and returns to  fill remaining orders and reach for liquidity."

[07:09] I know some of you guys had a positive  experience with SMC and are ready to   say how wrong this Reddit user is. But I want to  show you that you are most likely profitable with   smart money concepts because you yourself have  become smarter than when you started trading.

[07:24] Most of us agree that more than 60% of  trading success is based on psychology,   money management, etc. The entry strategy  and concepts like these play very little   role in your profitability. In  the beginning, most of us don't  

[07:38] really have any clue what's important. But  over time, with more trading experience,   you slowly get your trading psychology and money  management right, resulting in better results. It doesn't matter if you start with classic  simple price action or complicated smart  

[07:53] money concepts. As long as you get  better at the trading psychology part,   But if you start with something good and simple,  that profitability point in your trading journey  

[08:05] might come much faster. If you start with  something unnecessarily complicated, it might   take a while to figure out that complicated thing,  pushing the profitability point further away.   I'm oversimplifying here, but it doesn't make any  sense to use unnecessarily overcomplicated things.

[08:21] So, before starting to write this video, I  was going through as many different views on   SMC as I could. One of the posts I found was  from a so-called Million Dollar Trader and  

[08:33] Number 1 Forex Trading Coach. I'm not  sure about the number one Coach part,   but he claims to run a trading firm.  Anyway, what I found interesting is that,   even though he is teaching Smart Money  Concepts here, his first line literally says,  

[08:47] "SMC is price action by a different name." Then,  he goes on to say that even though SMC traders   use foreign names like "liquidity grabs" and  "mitigation blocks," it's basically the same   thing people have already been using for a  while now. If more people taught SMC with a  

[09:03] neutral view like this, I bet beginners wouldn't  be confused and think that it's something new. Some SMC traders are probably thinking, "I'm  being too harsh on Smart Money Concepts. If I  

[09:17] just try learning it properly, I would see  how less complicated and smart it is." So,   I gave SMC trading a serious  try, and here's what happened. They look at 3 things before entering the trade.

[09:32] Step 1 in the Smart Money Concept entry is  to identify the trend of the market using   the Higher Highs and Higher Lows Price Action  Pattern. I don't see anything wrong with this,   actually, because they are just saying to use  classic price action to identify the trend.

[09:46] But then, in step 2, they say to Identify Key  Order Block Zones from the Smart Money Concepts   because these zones are areas with a significant  imbalance between supply and demand. On a chart,   the order block looks like this. And this is  where every price action trader says, "Hey,  

[10:02] I have seen this one," because it's been called  a simple resistance area for more than 50 years. The third step is to basically take a short trade  when the price comes in this order block zone. So far, from a price action perspective, Smart  Money Concepts has said to wait for the price to  

[10:18] come inside a resistance area in a downtrend.  Other than the unnecessary order block word,   it's simple. But then it said  something really interesting.   "A Strong Low is The Low that Causes  Manipulation and Break Structure."

[10:36] I was super confused by this line. What  Manipulation are you talking about? I   scrolled down and saw this chart. But  still couldn't see the Manipulation. from a price action perspective, all  I see are basic swing highs and lows.

[10:51] If you are wondering what this BMS word is,  it just means a normal breakout. It's one   of those things that is used to trick new  traders into thinking it's something new. Then Smart Money Concept said that this swing  high in a downtrend is a strong resistance.  

[11:04] And this swing low in an uptrend is  a strong support. But based on what   I have learned by trading price action  in the live market for around 8 years,   this just looks wrong. Pullback Swing  lows like these are actually weak support  

[11:17] because they are often not visible on  higher timeframes in a good uptrend. So far, Smart Money Concepts has  not said anything smart. In fact,   I would argue that it said some things really  dumb. But things got even dumber. Because it  

[11:30] said that if the price makes this pattern, it's a  weak low. But wait a minute, if I put the previous   smart money drawing next to it, didn't it say  this pullback swing low was strong? And now,   it's saying if the price breaks below that  strong support to give a bigger pullback,  

[11:46] the new swing low is a weak support. That  doesn't make any sense. How is the smaller   pullback in a trend a strong swing low, and a  bigger pullback in the same trend a weaker low? There was no reason given behind this smart logic.  But I think this Smart Money Concept is guessing  

[12:01] that if the previous swing low is broken in an  uptrend, it can be the start of a new downtrend,   which could look like this in the future. In  that case, the swing low can be weaker since   swing lows are usually weaker in a downtrend.  But what if the price does this instead? So,  

[12:17] this pattern is not a clear confirmation  of a downtrend. From my experience,   it mainly means that the uptrend is slowing  down. After that, the price could go up again,   or sideways, or down. Nothing strongly says  this should be a weaker swing low than the  

[12:32] previous one, which SMC previously  said was strong for some reason. There is another flaw in the SMC logic. If  the price gives a bigger pullback like this,   previous one. If more people can see it, then  more people can react to it. For example,  

[12:50] when the price comes near it again, they can  buy, calling it a support trade. In other words,   this bigger swing low that Smart Money Concepts  said is weak can actually act stronger.

[13:04] While showing how to take a short trade  near a simple resistance, SMC not only   rebranded the same things into confusing  names, but it also made up nonsense logic.  To be fair, the Classic Price Action  also contains a lot of bad logic,  

[13:17] but it's far less compared to SMC's logic.  Price Action is also much simpler to understand. Is it possible that since I started as a Price  Action trader, everything I'm saying is biased?

[13:32] Maybe! But I spent over around  3 weeks researching this topic,   taking different views into account, and still,  Smart Money Concepts looked like a rebranded,   unnecessarily overcomplicated  thing with a lot of nonsense logic.

[13:46] The funny thing is that we retail traders,  people who trade on their own accounts,   create very low volume in the market most of  the time. Big banks and other institutions on   the other hand, buy sell in quantities that are  way bigger than ours. But according to SMC logic,  

[14:08] Now I agree, sometimes retail traders  create positions that big players care   about. But most of the time,  no one gives a crap about us.

[14:20] This Reddit user said it in a rude but  funny way. SMC traders do not trade like   a bank. They do not trade differently  from any other retail trader. They are   not doing anything worldbreaking.  They are trading basic price action  

[14:38] I have used in my 8 years of trading journey.