SMC Trading Strategy: A Step-by-Step Guide to Becoming a Profitable Trader

This SMC trading strategy that I’m about to share with you could genuinely make you a profitable trader if you just follow along. In this blog post, I will provide a step-by-step trading plan on how you can actually execute this trading strategy. I’ll show you a live example of a trade that I took using this exact strategy last Friday. To prove all the doubters wrong, here’s a screenshot of before the trade was taken that I sent into my community. You can see here I have the screenshot, my order block mapped out, and I give the instructions: run on sell side, which means wait for lower prices; LTF confirmation, which means lower time frame confirmation, which is my entry model; and then longs into buy side liquidity and hold partials for swings.

All of this literally means wait for the price to come lower into our gray box, wait for our entry model, and then long into our targets. It’s that simple. I give the game plan before the trade even played out. To go one step further, here are a bunch of screenshots from members inside my community all taking the same trades. This here will be the exact trade that we’ll be going over in the end, but before we do that, I want to walk you through every single step to understand this strategy from beginner to advanced. There are five steps in total, starting with step one, which is directional bias.

Step 1: Directional Bias

The questioning behind directional bias is essentially, where is the market heading to next? Here we have this diagram, and I’m going to start with everything on theory, and then we’ll get into the practical at the end of the blog post.

If we’re looking at theory, just before we dive in, do me a massive favor and show me your token of appreciation for creating this super high-value free content that’s better than most people’s paid stuff. To show your support, like this blog post and subscribe to the channel. Let’s go in.

So, what we’re looking at for step number one is directional bias. It’s very simple. We want to know where the market is heading, and the way we do that is obviously through market structure. Here we are showing a theoretical framework of market structure, and what you want to do is take the most recent low and the most recent high. This right here is going to give you your framework of understanding, your trading range. This is where prices range between low and high.

Let’s say hypothetically at this point in time you don’t know whether we’re bullish or bearish. What you wait for is you have your high and you have a low. You can draw a box across like this and wait for a breakout of your trading range. Everything inside of this gray box until we break out is all internal. We have our external low, our external high, and then you can see we break out to the upside. Then it’s very clear to us that we have had a break of structure to the upside, which means we are bullish. If we are bullish, we are looking to long. So now we have low, high, higher low, higher high, and we’re bullish. It’s very simple; we’re looking to long the market. That is ultimately how we establish our directional bias. We know where the market is heading by identifying these external swing points of market structure, and if they’re making a series of higher highs and higher lows, then the price is going to trade higher, and therefore we want to look at longing.

That’s step number one: we need to identify if we are looking to long or short. Let’s get into step number two.

Step 2: Identifying Areas of Liquidity

Inside of your trading range. Now, bear with me just a moment. It’s actually very simple. We’ve just gone over market structure and established that we are bullish. So we’re bullish, we’re looking for longs. Here is our protected swing low because this right here is the low that broke the previous high and put in this high right here. So we have this right here as our protected swing low, and we have this right here as our weak high.

In a nutshell, we already know we want to long. We want to long above this low and sell that long back above this weak high. We have our directional bias, and now we need to identify all the key areas of liquidity that sit inside this trading range that we must avoid at all costs. If you don’t spot the liquidity, you will be the liquidity. The most common form of liquidity is ultimately going to be forms of equal lows, equal highs, Asia session high, Asia session low, or old highs and old lows. That’s pretty much it. Anywhere that there is likely to be somebody’s stop loss.

If we look at this right here, this is the exact example and scenario that we’re going to go with. Here in blue, we have the Asia session range. For those of you who know me and have been watching my content, you know that I love the Asia session range. I love to use the high and the low as liquidity. On top of that, we’re going to mark out our Asia session range, which is right here. That’s a pocket of liquidity. We have the Asia session range low as another pocket of liquidity. We have an old high here in the form of this high right here that acts as liquidity. We have this high in here, which again acts as liquidity. We have equal lows in here, which all act as liquidity.

What is Liquidity?

Liquidity stands for money, the fluidity of money. Ultimately, when we’re looking for liquidity, all we care about is where the stop losses, take profits, and entries are because every time one of those things happens to a trader, that is liquidity coming into the market. For example, if you have an order placed, when that order gets triggered, you will either enter buys or sells into the market, so money flows into the market. When you get stopped out, that stop loss doesn’t take you out of the market; it actually puts you in the market in the opposite direction. If you’re looking to long the market and your stop loss is down here, when the price hits that stop loss, it triggers as a sell position.

So, we have stop losses, entries, and take profits. Take profits are the same. If you’re shorting and your take profit is here, when you hit that level, it activates as the opposite side of this, so you will buy back the position and take the profit in between. That is liquidity. Now you have to ask yourself, where do people put their stop losses, take profits, and get into trades? The most common places for that are trendlines, equal lows, equal highs, and time-based highs and lows. These are all areas where people are taking profits, getting into trades, or stopping their trades at a loss.

In this picture right now, this is what I see. We have this internal structure that a lot of traders will be looking at. When you see this internal structure get broken, going high to low, a lot of traders are looking at that and thinking it’s time to short the market. If there are sellers involved at these levels, where are they going to put their stop losses? They’re going to put them up here. Another scenario, price comes in here and pushes out. Traders see this double bottom and think the price will trade higher. There are two types of traders: those executed on the way up and those waiting for one more confirmation. They put their stop losses here or here.

Another scenario, price puts in this high and pushes out, creating a temporary area of resistance. Traders short the market here and put their stop losses here or here. In just this short piece of price action, you can see how different traders see different things and make decisions based on those things, putting their take profits, stop losses, and orders, which all act as liquidity. We want to wait for everyone to be taken out of the market.

Step 3: Identifying Order Blocks

Order blocks or key areas of supply and demand are areas where smart money is involved. We have the same framework. Step number one, we have our directional bias, and we are bullish. We have our liquidity, buy-side liquidity, sell-side liquidity, and buy-side liquidity. Now we need to identify an area of interest for price to react to and for us to get involved. This is always some sort of sell to buy that caused the break of structure, positioned below the area of liquidity.

We have the perfect order block setup, a sell to buy candle that leads to the break of structure, positioned perfectly below this area of liquidity. That would be our order block. Step three is about identifying a key order block in alignment with the direction we’re trading. If we’re trading long, we need to find an order block, an area of demand, inside this bullish price level. When the price comes back to it, it hits those orders and shoots off. An order block is an area of price where we expect and can see a large number of orders already sitting there. Think of it as a roadblock; sellers come into the market and are met with demand from this order block level, and no matter how hard they try to sell, they will not get through because there is so much money in this level. Price will come into this level, these orders will get triggered, and price will shoot off. That is the concept of an order block.

Step 4: The Trading Strategy

The trading strategy is about how to get in and out with money. We’ve just been through the first three steps, and now we’re combining them all into The Trading Strategy. After this, I’ll show you how this looks in the live market and the exact trade we took on Friday using this system.

The filled lines represent the 15-minute time frame, and the dashed lines represent the 1-minute time frame. Let’s go through step by step. Step number one is our directional bias, and we’ve already established that we are bullish, trading from swing low to swing high. We are bullish and looking for longs. Step number two is identifying key areas of liquidity. We have liquidity in these highs and across these lows. We want to see a run on this sell-side liquidity, wait for price to get into our order block, and then wait for the lower time frame entry model.

Step number three, our order block, is positioned below the liquidity perfectly. Step number four is putting it all together. When we get our run on liquidity and get into our point of interest, it’s our job to drop to the 1-minute time frame and wait for our entry model. As the 1-minute comes into the order block, it is bearish. When it shifts from bearish to bullish, that is the final piece of the puzzle. It tells us there are many orders in this order block level, and the buy orders are kicking into the market. Once we get that, we repeat the same thing because it’s fractal. We get our change of character, wait for an order block on the lower time frame, and take our entry at this level, targeting old liquidity and a fixed take profit level.

Now let’s put all of that together into the actual charts.

Live Market Example

Here we are on the 15-minute time frame, Euro Dollar, Friday the 24th of May. It looks plain and confusing now, but you’ll quickly understand. From a structural perspective, which is step number one, we have specific rules for market structure. If you haven’t already, check out the market structure video linked in the description. Step number one is understanding our market structure. We have a swing high, a swing low, and a higher high. Our conclusion is that we are bullish, therefore looking to long.

Turning on my special indicator, it shows the sessions. The blue box represents Asia, which represents a large area of liquidity. Step number one is bullish. Step number two is identifying liquidity. We have targeted highs, trendline liquidity, old highs, and equal highs. We also have Asia session high and low, with relatively equal lows. This completes step number two. Step number three is identifying our order block. We look at the final sell to buy candle and pull it across. This is our order block, positioned below the liquidity perfectly.

To conclude, step number one is our directional bias, we are long and bullish. Step number two is Identifying Areas of Liquidity. Step number three is identifying our order block. Step number four is putting it all together. We wait for the liquidity to be taken, price to come into the order block, and look for a lower time frame confirmation. This is the exact strategy outlined in the theory.

Playing the price, we wait for the liquidity to be taken and price to get into the order block. Once tagged into the position, we drop to the 1-minute time frame. We wait for the shift in structure from bearish to bullish. We look for an area of interest to take the trade from. We identify the most recent liquidation and the order block on the 5-minute time frame. We put our entry, stops, and targets in place. We target the liquidity and take profits at fixed levels.

Playing the price, we see the position get tagged in, the price hovers, and then breaks the level. We move our stop loss to break even and wait for the trade to play out. On the 5-minute time frame, take profit levels get hit, and the majority of the position is closed. A small amount of the position runs to the final take profit level.

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