Smart money traders use various strategies and techniques to analyze the market and make profitable trades. In this guide, we’ll discuss three key concepts used by smart money traders: Order Blocks, Breaker Blocks, and Fair Value Gaps.
Order blocks
Order Blocks are candles that occur just before a break in the market structure, typically found at a swing high or low where price has quickly moved away from.
The last down close candle before the market structure breaks to the upside or the last up close candle before it breaks to the downside is called an Order Block.
These blocks represent areas where orders have been stacked to push the market in a specific direction, leading to a rapid move away from that area. Price often returns to retest these blocks, and traders look for Order Blocks that have taken out a previous high or low, showing signs of manipulation such as taking stop loss orders.
Breaker Blocks
Breaker Blocks are Order Blocks that have been traded through and can be retested as a support or resistance level depending on the market’s direction. These blocks often represent a significant level of market activity and can provide valuable insights for traders.
Fair Value Gaps
Fair Value Gaps refer to imbalances between candles that only offer one side of the market. These gaps occur when there is a significant difference between the last wick of the previous candle and the top wick of the next candle. Typically, price returns to these gaps to fill the imbalance, providing opportunities for traders to enter or exit trades.
In conclusion, understanding these smart money concepts can help traders identify potential trading opportunities and make more informed decisions in the market. By incorporating these concepts into your trading strategy, you can improve your chances of success and profitability.
Smart Money Concepts:
Smart money traders use various strategies and techniques to analyze the market and make profitable trades. In this guide, we’ll discuss three key concepts used by smart money traders: Order Blocks, Breaker Blocks, and Fair Value Gaps.
Order blocks
Order Blocks are candles that occur just before a break in the market structure, typically found at a swing high or low where price has quickly moved away from.
The last down close candle before the market structure breaks to the upside or the last up close candle before it breaks to the downside is called an Order Block.
These blocks represent areas where orders have been stacked to push the market in a specific direction, leading to a rapid move away from that area. Price often returns to retest these blocks, and traders look for Order Blocks that have taken out a previous high or low, showing signs of manipulation such as taking stop loss orders.
Breaker Blocks
Breaker Blocks are Order Blocks that have been traded through and can be retested as a support or resistance level depending on the market’s direction. These blocks often represent a significant level of market activity and can provide valuable insights for traders.
Fair Value Gaps
Fair Value Gaps refer to imbalances between candles that only offer one side of the market. These gaps occur when there is a significant difference between the last wick of the previous candle and the top wick of the next candle. Typically, price returns to these gaps to fill the imbalance, providing opportunities for traders to enter or exit trades.
In conclusion, understanding these smart money concepts can help traders identify potential trading opportunities and make more informed decisions in the market. By incorporating these concepts into your trading strategy, you can improve your chances of success and profitability.