The SMC Dictionary: Learn the Key Terms of Smart Money Concepts

[00:03] ended up more lost than anything else because of the sheer number of English terms like number of English terms like boss, shock, orderock, fervelo, and gap, among boss, shock, orderock, fervelo, and gap, among countless others, relax and stick

[00:17] with me, because in this video I want to teach you the dictionary of institutional analysis in a simple and objective way teach you the dictionary of institutional analysis in a simple and objective way . After today, you will not only have much more clarity in identifying

[00:30] these concepts in the graph, but you will also be able to learn and absorb any content related to this much better, because you will know what it is and what it means. So, get comfortable in your chair, grab a pen and paper, and

[00:47] let's get to the content. Welcome to another video on this channel. My name is Ana, I'm a trader, and I decided to create this lesson in response to requests and

[00:59] also to address a common problem for most traders: understanding the amount of English concepts used in the SMC trading system. And I know

[01:12] exactly what that's like, folks, because I've been through it too. I had a lot of difficulty when I started studying institutional analysis, partly because I don't speak fluent English. On the contrary, my English is very basic, very

[01:26] beginner-level. So yes, I had a lot of difficulty. Well, it was only through repetition , day by day, through market experience, that I was able to absorb all of that. So, the goal of today's video is to bring you all the clarity you

[01:42] need, not only to understand these terms and what they mean, but mainly to know how to identify them on the chart, further improving your

[01:54] analysis. So today I'm going to introduce the main terms of institutional analysis so you can finally start to evolve in this area. But of course, before anything else, don't forget to subscribe to the channel and leave your

[02:10] like; it's very important to me so that YouTube recommends my videos to more and more traders who are on this journey towards consistency. So, hit the like button and subscribe to the channel. Turn on notifications too, because there's a

[02:25] new video coming out every week. And here's my Instagram for anyone who wants to follow me: @euanatavares. Well, to start from the beginning, what exactly is SMC? Smart Money Concepts,

[02:38] translating concepts of smart money. Basically, it's a way to analyze the chart based on the behavior of the big players, those who really move the market . He focuses on understanding where

[02:54] institutional money is operating so that you stop operating like big retail, like the masses, and start surfing alongside the sharks,

[03:06] definitively ceasing to be a sardine, fish food, and starting to swim with them. And to make our lesson even easier, I'm going to divide it into

[03:18] blocks, where in each block I'll talk about concepts that are similar, that relate to each other, OK? In block one, we'll talk about structure, about structure, market structure. Excuse my

[03:32] broken English, but basically, the translation is market structure. You've probably heard me talk a lot about market structure, especially since we always start our analysis by identifying what the structure is

[03:46] at that moment. So, what exactly is a market structure? It is the price movement forming tops and bottoms that can be ascending or descending. It shows whether the market is going up or down, that is, whether it's in an

[04:01] upward or downward trend. What is a high-rise structure? The market is making higher highs and higher lows. This is a piece of cake , right, folks? What is a , right, folks? What is a low-level structure? Descending tops and bottoms

[04:15] . This becomes even clearer in the graph . What do we have here? Just by . What do we have here? Just by looking, it shows an upward structure, with ascending tops and bottoms . So, if I have here in the background the market that was falling, look,

[04:31] descending highs and lows, I have a bearish structure that's as simple as that a bearish structure that's as simple as that . Boss, breakfast,

[04:46] structural breakdown. You already know what a structure is. And the boss is basically the breaking of the structure. Basically, to be even clearer, it's the renewal of a top or a bottom. Because when we talk about breaking down the structure, sometimes it even

[05:01] seems like an inversion, right? But it 's actually a continuation. Whenever you talk about a boss, remember continuity. Continuity. Get that little word stuck in your head. Therefore, a break above or below a significant high or low indicates a continuation of the

[05:16] trend. So, for example, if I have an upward trend have an upward trend happening here, an upward structure, every time the previous high is broken, that is, when it is renewed, we have a boss

[05:31] that is the continuation of that trend. In other words, we had a boss here when the previous top spot was broken. I'll put it here nicely for you. We had another boss here when this top was renovated, it was broken. So basically, every time

[05:47] I have a trend continuation, a renewal in an uptrend, a renewal of highs, I have a bullish boss. And if I have a bullish boss. And if I have a downtrend, with descending tops and bottoms

[06:00] , what is a boss in a downtrend? Think about it for a moment before I put it here on our whiteboard. Boss in a downtrend is a renewal of funds. In other words, if the price is falling, with each

[06:15] new low, I have a boss happening. So here I had one boss, here I had another boss, look, everything's nice and neat. Here I had another boss.

[06:30] Here I had another boss. And here I had another boss. Fund renewal is a continuation of a downward trend. So basically, that's the breakfast

[06:45] structure. Looking at the chart, I saw a boss here; the market reached a new high. Here I had a different boss, the market renewed its top position . Here again I had another

[06:58] boss, the market renewed itself once more. So, every time the market makes this kind of high-end renewal in an uptrend, we have a bullish boss. If it were the other way around, folks, if the market started to fall and suddenly began

[07:13] started to fall and suddenly began to make ascending bottoms, or rather, descending bottoms, that is, a bottom lower than the previous bottom, we would have, oh, a boss here, another boss down there. The market has been

[07:28] another boss down there. The market has been thoroughly renewed, oh, another boss down here. And this continues until the moment when this market reverses its flow, which is what we're going to talk about now, which is what we call a shock, a change of course, a

[07:44] we call a shock, a change of course, a change in character, that is, the first change in character, that is, the first break against the prevailing trend can often signal a market reversal, a reversal of the

[07:58] main flow. So, imagine with me that the market is here working in an upward trend, renewing its highs, in other words, like an autistic boss, and suddenly, at a certain point, this market that was rising loses the last

[08:15] was rising loses the last valid low. What happens? What is the last valid bottom of the uptrend? It is the bottom prior to the renewal of the highest peak. So, what was the highest peak? This peak here, what was

[08:30] the bottom that originated this peak? This background here. So, when the market loses that bottom, that is, it loses the last valid bottom and closes breaking through that bottom, we have what we call a tque, exactly at this

[08:47] call a tque, exactly at this point, at this moment. So this is what it means; it 's a movement that very possibly initiates the reversal of a new trend. If the market was previously rising, from the moment

[09:00] was previously rising, from the moment it breaks the last valid low—of course, there are rules to validate this as well—we tend to believe that it will now possibly move in the opposite direction, that is, it will begin a

[09:14] downward movement. The opposite is also true . Imagine with me that the market is here, making descending highs and lows , renewing lows. And then what happens? The market, which was falling here, has lost its

[09:32] last valid high. What is the last valid top? It is the peak that originated the movement of the lower bottom. So, this little peak here, which was the peak that

[09:45] originated the lowest movement of the previous trend, is the valid peak of this trend. From the moment the market loses that peak, we have what we call a bullish shock. In other words, if the market was

[10:00] falling, from that moment on it tends to move upwards. Example in the graph. The market here was previously rising, making higher highs and higher lows , renewing itself here, doing its thing, as you just

[10:16] learned. And at a certain point, what happened? The market missed its last valid low here. What is the last valid fund? It is the bottom that originated the highest peak of that trend. When it loses that last

[10:31] valid low, which was exactly here, what we call a shock occurs, and the market tends to reverse its flow in the opposite direction to the previous movement. So it was on the rise, lost its last valid low, and

[10:46] plummeted. Conversely, it's also the same thing. Notice that here, right after that , the market fell sharply, renewed its grip here at the bottom, making a boss, and suddenly what happened? The last valid peak was exactly at this point of the

[11:03] was exactly at this point of the previous drop, and the market simply missed that last valid peak. What is the last valid top? The peak that triggered the lowest point of that downward trend. So this rupture here,

[11:18] which was exactly at this point, this rupture here is what we call a shock. Block two. Now we're going to talk about liquidity. Essentially,

[11:30] liquidity is like the fuel of the market. It's what really makes the asset's price move. And it's very important that you understand this concept because it's simply one of the most important parts of

[11:44] institutional analysis. It is the basis for our decision-making. Why? There are a few ways you can identify this on the chart, okay? First, you need to understand that liquidity zones are regions where retail stop-loss orders are concentrated

[11:59] . Secondly, these stops are usually placed above either the tops or the bottoms. And third, these patterns, when we look at the graph, they 're kind of obvious. Why? Because that's usually where the big retailers are

[12:16] located. If you stop to think about it, why do most people lose money in the market? Because most operate in the same way, most operate according to obvious patterns. Since we're going to operate now, and we're going to look at the chart

[12:30] not as a retail investor, not as a large mass market, but as an institutional investor, we need to avoid those regions where the majority is operating. And where are these regions? Regions, for example, where I have a high concentration of

[12:45] purchased operations. Right down there, theoretically I also have many stop-loss orders placed. Or, for example, regions where I have a high concentration of sell orders, right up there. I also have many stop-loss orders placed. In other words

[12:59] , these zones, with their high concentration of money, are perfect for institutional investors to manipulate and continue their real movement, generating the necessary liquidity they need to proceed with their real movement.

[13:14] So let's imagine some examples here, okay? Large retailers, when they see, for example, a double top, look at this and think: "Wow, the market is really respecting that resistance

[13:27] there, I'll sell when the market reaches that region." So, the market simply starts accumulating at those points. Every time you look at the chart and identify leveling regions, whether it's double tops or above

[13:43] two or three more level tops or even leveled bottoms, these regions have a lot of liquidity, that is, there are many people positioned there, because many people, right, the great mass will look at a region like that, for

[13:58] resistance, wow, the price is respecting it a lot when it reaches that region. I'm going to place a sell order there. So, automatically, that person's stop-loss order ends up a little bit above, a little bit after that

[14:12] sold area. In other words, what does the institutional aspect do? He goes there and manipulates that region, which is what we call liquidity capture,

[14:24] generating the necessary liquidity he needs before proceeding with his actual movement. So, everyone who was short in this sales area, for example, was stopped out. A stop- loss order is a purchase order, and this purchase generates the

[14:41] necessary liquidity that the institutional investor needs to proceed with their actual move to liquidate their positions. So, folks, this will be represented in the graph in various ways. Regions where we

[14:56] various ways. Regions where we have support levels that are being strongly respected, or sometimes even a trendline, an upward trend line, where we also have leveled bottoms, there is a lot of liquidity. Right here,

[15:10] at these points, we have a lot of liquidity, meaning it's a region that will very possibly be captured and manipulated soon. And here's an important point: many people ask, "What is

[15:23] manipulation? What is liquidity capture?" Liquidity capture occurs precisely when a region is broken out that previously had many accumulated orders. So here, since there were a lot of people buying along these

[15:38] trends, the institutional investors went in and manipulated the market. Why do we talk about manipulation? Because the big retailers look at this place and think, "Hey, great area to shop, I'll buy here." Whether you like it or not,

[15:51] this is a way of manipulating the chart, because it makes you think in a certain way, only to then stop you out in that region most people end up losing, because they end up falling for the manipulation here.

[16:08] When you start operating with eh as an institutional investor, you avoid this type of situation here, because you [snoring] wait for this capture to happen, wait for this manipulation to happen, and only enter after that. But that's a

[16:23] strategy lesson that I'm not going to talk about now, right? So basically, this is for you to understand the theory of what liquidity is. So, imagine the entire region where I have level tops, level bottoms, wait a minute, the

[16:38] large mass is positioned here. So, if the large mass is positioned here, this will soon be captured, this will be manipulated. I don't manipulation, I don't want to be stopped. That's why you avoid those

[16:52] regions, wait for the liquidity capture to happen, wait for the manipulation to happen, and enter after that manipulation. Let's look at some examples in the graph now. Look here with me. The market has shown a strong

[17:08] downward trend. At this point here, it has generated some relatively level peaks. It doesn't have to be, it doesn't have to be exactly the same , okay, guys? So it's relatively even. Sometimes it will be perfect, sometimes it won't. So notice

[17:22] that here I had a lot of liquidity in this resistance region. What happened? The people who were all sold out here were manipulated, they were captured. Just look at the capture movement here! It was manipulated, and only then did the

[17:38] market continue its actual downward movement. So, someone operating in institutional analysis, for example, in this scenario, isn't going to buy this sale here with all this liquidity, all this leveled-off price; they'll wait for the manipulation

[17:52] and then enter. The same thing happens at the opposite end. So, for example, let's take an example from back here. We have here, look, what did we have back here? Lots of cute little things here in this trend line,

[18:08] look. Lots of leveled bottoms here in this region. Just look at that. What happens? People bought in here en masse, then suddenly, everything went wrong, manipulation, then suddenly, everything went wrong, manipulation, liquidity capture, and only later did the

[18:23] market start to go up again. This will always happen, guys, always, okay? So, every time you identify obvious chart patterns, like, say, bullish flag, bearish flag, ascending wedge, descending wedge, sideways trading

[18:38] range, uptrend lines, downtrend lines, all those leveling areas are perfect zones of high concentration of retail orders to serve as liquidity for the

[18:52] compound trader to sell their positions, capture all those people, and only then continue with their move. So, basically, that's how it works. Order basically, that's how it works. Order Block, which

[19:07] you've probably heard a lot about, and this one you've likely already learned about, is basically an institutional region where the big players, banks, institutions, and sharks are positioned. So, it's like a

[19:20] trail on the graph that I can glance at and clearly identify glance at and clearly identify as an institutional region. It is usually the last candle before the strong movement. There are several types

[19:35] of order blocks. I've already made a video about this on the channel, and I'll even leave one somewhere on this screen for anyone who wants to watch it. Well, not all of them are valid or workable, and it's important that you learn about that

[19:48] before you start clicking, okay? Today we're just going to present the concept and the translation so you can understand it. But basically, that's it . I can see some examples in the graph , look. Order block, last bullish candle before the

[20:03] downward movement. Oh, look at that impulsive movement, how it happened! Here's another one that's a little taller, look. The last bullish candle before the downward move. Why last bullish candle? Because the order block is usually a

[20:17] candle that opposes the prevailing movement. So, for example, you downward trend is strong. What is the block order here? It is the candle that opposes this movement, which subsequently has an aggressive,

[20:33] impulsive movement. And that's where we get into the second concept, which is the get into the second concept, which is the fair value gap, the famous FVG, which translates to the fair value gap. Basically, the boil and gap come after

[20:47] the order block. Why? The group is so strong, isn't it? There are so many... it 's a region with so many institutional orders in place that after it appears, after this bloc is formed, the movement is very

[21:02] impulsive, whether downwards or upwards. So, this generates what we call a fair value gap, or FVG. What exactly is this FVG? It's a price imbalance, where the market moved very quickly, leaving a kind

[21:17] of gap, an empty space, that very strong, very expressive candle, you know? So, [snoring], what does this FVG represent? A region where the price tends to return to balance out before continuing. So, since it was a

[21:31] very aggressive, very expressive, very explosive movement, it leaves this space where the price tends to eventually return to close that inefficiency. So it acts like a magnet. Look here at the graph, for

[21:45] example, when we talk about this empty space, it's like this large body here, it's in sequence with a block of order. So, when we have this expressive, full body here, you see? This is an FVG. The market

[22:02] tends to come back here at some point to mitigate, that is, to at to mitigate, that is, to at least 50% of that body, right? Well, to be precise , that's more or less what he did in that region, in order to balance out that

[22:16] inefficiency. And so, we'll be there, and this will be in any time you'll see it appears in all of them, like H4, the daily one, right? Every time you identify this significant movement, look here too, the market has reversed and

[22:32] continued its downward movement, it tends to reverse by at least 50% before continuing its real movement. And then we get into another talked about here, that you always ask me about: what does it mean to mitigate an

[22:45] ask me about: what does it mean to mitigate an order block or mitigate an FVG, to lock in an FVG? Basically, it's when the price reaches that region and doesn't have the strength to break through. So, for example, imagine that the price comes here, look, we have an order block here

[22:59] , it arrives, it hits this block, that is, it mitigates this block, that's when it's touched for the first time. So, when the price first reached this point, it mitigated that order block. He established himself within this block

[23:14] of order and tends to continue with the predominant movement. So, if the momentum was downward, it was bearish; if he nailed it, if he mitigated and aligned the flow, for example, at the micro level, he tends to continue this downward movement

[23:27] . So, and so on. So, to nail it, to mitigate it, is to touch, is to reach that same region to close those orders that were orders that were previously open. Premium and discount,

[23:42] previously open. Premium and discount, reward zone and discount zone, two terms that are also among the main criteria in institutional analysis. And when we talk about a premium zone, we identify it as a region where the asset price has

[23:57] already risen too much, it's already very expensive. And that's why in this scenario we look for sales opportunities. In the discount zone,

[24:09] we've identified that the asset's price has already fallen too much, meaning it's very cheap, and that's why we're looking for buying opportunities there. Of course, all of this is within a broader context, a macro scenario, and not just because,

[24:25] oh, I noticed the price has dropped too much, it's very cheap, I'm going to start buying randomly. Not the other way around, oh, it's already gone up too much, I'm going to sell here randomly. Of course . There needs to be a scenario there that

[24:38] leads you to make that decision with great confidence, of course, also considering other confluences of factors. But this information about premium and discount zones is just to give you context for your decision-making. And it's really cool because when

[24:53] we apply this to the chart, there's a tool that we use a lot in our daily lives to give us this scenario, to give us this direction, which is Fibonacci retracement. So, for you to memorize, it's even easier, okay?

[25:06] Imagine that here the price of the asset is falling, that is, in a downtrend. If the market is falling, I want to look for a selling opportunity, which makes the most sense, right? So, what do I

[25:20] do? I can't just go around selling things randomly here. I come here and grab my Fibonacci retracement tool. If the price is falling, I always plan from the beginning to the end of the upward movement. So what's interesting here? Write it down, okay? Anything

[25:37] interesting here? Write it down, okay? Anything above the 50% Fibonacci retracement level is considered a premium zone. And everything below the 50% Fibonacci retracement level is considered a discount zone. So, let's put it here

[25:53] to make it even clearer for you all . Premium zone above 50%. . Premium zone above 50%. We'll also write "premium" here. This is a good place to take a screenshot so you'll never forget, okay everyone?

[26:09] Oh, it couldn't be more didactic than this, okay? And down here, everything okay? And down here, everything below 50% is the below 50% is the discount zone, folks. Oh, discount. We'll

[26:23] also put this here, nice and neat for you. nice and neat, right? Oh, get ready to screenshot and take this picture, because we ca

[26:40] n't forget this anymore. After this lesson, you'll no longer have any doubt about what a premium zone and a discount zone are . So, putting together what I just explained, okay? If I want to sell, the market is falling, the market

[26:54] is falling and I want to sell. Imagine with me that the price of the asset, look, it's in with me that the price of the asset, look, it's in this region here. Does it make sense to want to execute a sell order if the asset price is in a

[27:08] discounted region, that is, in a discounted market? No. Why? We understand that it's still very cheap there. What's the point of selling something cheap? It makes no sense. So I wait for the market to reach a contextualized region, that is,

[27:23] a premium region, a winning zone, to look for a selling trigger there and execute my order. Why do I say "trigger seller"? Because you 'll never use Fibonacci or just the premium zone in isolation, nor just the

[27:39] discount zone in isolation. You need to combine this with other information, with other confirmations, other points of convergence, so that you can execute your order. And then I'll also take the opportunity to answer another question about terms that aren't

[27:53] generate a lot of confusion. When I say supply zone, demand zone, everything above the 50% region, which is in the premium zone, we consider as the supply zone. So this could be a

[28:08] resistance zone, it could be a valid order block, it could be, for example, a downtrend line (LTB), everything in the winning zone we consider as a demand region, okay? These important points are the points of interest. Now, actually,

[28:24] correcting myself, supply zones are everything above the 50% region, premium zones, and everything below 50% are demand zones, which can

[28:36] be support, order blocks, uptrend lines, in short, anything that gives me context to execute a buy operation, okay? So, basically, that's how it works. Bringing this to the graph. Imagine this scenario with me: the market is

[28:51] falling, and I want to sell. So, what do I do? I use my Fibonacci retracement tool, project the impulse from beginning to end, and I already have the context example, does it make sense for me to sell here where the asset price is right now? No. Why?

[29:07] Because even though it's falling, I 'm in a discount area. I'm in a cheap area. What's the point of selling in this scenario? None. So I selling in this scenario? None. So I need the asset price to rise above

[29:20] 50% for me to look for a selling trigger and execute my trade. The same thing applies if the market is going up. So here I have it, previously the market was going up. If I want to buy something, what do I do? I take my

[29:34] FIBA, the project from the beginning to the end of the impulse, and I always prioritize buying operations that are below the 50% region, because it is below my

[29:47] 50% region that I have my discounted zone, that is, an interesting region for me to look for buying opportunities. If the asset price were up here, for example, above 50, would that make sense? It doesn't make sense. It's still

[30:01] too expensive for me to buy. So I need to wait for it to drop a little more, provide context for some trigger, and then execute my operation. And to wrap things up, let's talk about these last three terms that I know most of

[30:15] three terms that I know most of you are already familiar with, but some of you still struggle with them. So, to make it even clearer, "stop loss" literally means "stop loss," which is nothing more than your maximum loss limit

[30:29] than your maximum loss limit . How much risk are you willing to accept in that particular trade, in that particular operation? What is the amount you are willing to lose on that trade? When the price reaches that

[30:44] point, you're stopped out and that's it, right? Only by entering again at another entering again at another opportunity. "Take profit," in translation, means to take profit, realize profit, something along those lines, which is nothing more

[30:59] something along those lines, which is nothing more than the price range where you realize your profit, that is, the target of your trade, the "make me laugh," right, the thing everyone wants. So, stop loss is the point of maximum loss and take profit is the

[31:14] point of maximum profit you place in that trade. Break-even in that trade. Break-even is simply breaking even, meaning bringing the operation to zero. Imagine you entered at a certain point, the

[31:29] market moved, and then you took your entry point—or rather, your stop loss—and dragged it all the way back to your entry point, the same point. If the market returns to that region, your trade will end up breaking even,

[31:45] your trade will end up breaking even, at zero, meaning you neither lose nor gain any value, okay? Of course, folks, institutional analysis is very broad, right? It's a very complex universe and it has several other terms that

[31:59] I didn't even mention in this video so as not to confuse you, so as not to blow what I've given you today, I'm absolutely certain that you'll already have much more clarity, not only to understand

[32:13] the videos you'll watch, the content you'll consume about this, but mainly also to be able to identify this more easily when you're trading. And analyze the graph, okay? So, if

[32:28] this video helped you in any way, don't forget to like it, leave a comment, and also share it with that trader friend who urgently needs to understand and learn about these complex SMC terms. Thank

[32:45] you so much for being here, and I'll see you in the next video. Kiss, thanks. S.