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SMART MONEY CONCEPTS (SMC) IN TRADING: PART 2

2. KEY ASPECTS OF SMART MONEY CONCEPTS
• LIQUIDITY ZONES
Liquidity zones are areas on the price chart where a large number of stop-loss orders are placed. Smart money typically drives prices toward these zones to collect liquidity before making major price moves. Identifying these zones can help traders anticipate when large market movements are about to happen.

• MARKET STRUCTURE
The market structure reflects the current trend of the market—whether it's in an uptrend, downtrend, or consolidation phase. Smart money influences market structure, and SMC traders look for breakouts or breakdowns to determine shifts in market trends.

• ORDER BLOCKS
Order blocks are zones on the chart where institutional traders place large buy or sell orders. These blocks often serve as strong support or resistance levels. Recognizing these blocks allows traders to understand where the market might reverse or continue its trend.

• INDUCEMENT
One tactic used by smart money is inducement, where false signals are created to lure retail traders into wrong positions. After retail traders take the bait, smart money reverses the price trend, trapping retail traders and profiting from their losses. Identifying inducement patterns can save traders from falling into these traps.

• PREMIUM AND DISCOUNT ZONES
Smart money typically buys in discount zones (below the market's equilibrium) and sells in premium zones (above equilibrium). Traders use tools like Fibonacci retracements to identify these premium and discount zones for optimal entry and exit points.

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