Smart Money Concepts: Fair Value Gaps, Order Blocks and Structure Breaks

"Smart Money Concepts" (SMC), popularised in the ICT trading community, is a vocabulary for describing how price moves between areas of liquidity. Here are the core terms, without the mystique.

Market structure

An uptrend is a series of higher highs and higher lows; a downtrend, lower highs and lower lows. Swing points are found by comparing a candle's high or low with the candles on each side — OrderView's SMC indicator lets you set how many candles on each side count.

• BOS — break of structure: price closes beyond the last swing in the direction of the trend. The trend continues.
• CHoCH — change of character: price breaks the last swing against the trend. The first sign the trend may be turning.

Fair value gaps (FVG)

A fair value gap is a three-candle imbalance: a strong middle candle moves so fast that the wick of the first candle and the wick of the third candle do not overlap. The space between them is the gap. Price often comes back to such gaps before continuing. OrderView draws open gaps and removes them once price has filled them.

Order blocks (OB)

An order block is the last opposite-colour candle before a strong move that breaks structure — for example, the last red candle before a rally that makes a new high. The idea is that large orders were placed there, and price may react when it returns. A block is considered broken when price closes through it, and OrderView then removes it from the chart.

Liquidity

Equal highs and equal lows attract stop orders and breakout orders just beyond them. SMC traders expect price to "sweep" that liquidity before a real move. OrderView marks equal highs and lows as liquidity levels.

Putting it together

A typical SMC narrative: liquidity below equal lows is swept, a CHoCH forms, and price returns to an order block or fair value gap created by that move before continuing up. Each piece is an observation, not a rule. The concepts overlap heavily with older ideas — support and resistance, gaps, stop runs — under new names.

Common mistakes

• Marking every candle as an order block. Only blocks that led to a real structure break matter.
• Using lower-timeframe structure against a clear higher-timeframe trend.
• Treating zones as exact prices. They are areas; leave room for overshoot.

Educational information only, not investment advice. The SMC / ICT indicator is available in the OrderView Android app.