SMC glossary

Smart money concepts glossary

Every term used on ForexLens, defined the way the games grade it. Where a term has a fixed rule, the rule is given. Where teachers disagree, we say which reading we use.

Smart money concepts are a vocabulary for describing charts, widely used and also contested. A definition here tells you what a word means, not that trading it makes money. Most retail traders lose money.

87 terms · Reviewed November 15, 2026

4pm fix: A benchmark exchange rate calculated from trades in a five minute window around 16:00 London time. Funds use it to value foreign holdings, so large client orders are tied to it. See how FX dealers and the 4pm fix work.
Accumulation: The first phase of the power of three: a quiet range, in ForexLens the Asia range, that lasts until price leaves it. The idea is that positions are built while price goes nowhere.
AMD: Short for accumulation, manipulation, distribution: the three phases SMC traders look for in a trading day. Another name for the power of three.
Ask: The price at which a dealer will sell the base currency to you, also called the offer. You buy at the ask. It is always a little above the bid.
Asia range: The high and low made during the Asia window, 20:00 to 00:00 New York time in ForexLens. SMC traders treat its two extremes as session liquidity that London may take.
Backtest: Applying fixed trading rules to past data to see how they would have done. Only meaningful when the rules were written first, every occurrence is counted and costs are included. Practised in Backtest Detective.
Base currency: The first currency in a pair. In EUR/USD it is the euro. The quoted price is how much of the second currency one unit of the base currency costs.
Benchmark: A published reference rate that many participants agree to use, for example to value a fund. Orders to trade at a benchmark concentrate real buying and selling into a short, known window.
Bid: The price at which a dealer will buy the base currency from you. You sell at the bid. The difference between bid and ask is the spread.
Blind spot: A ForexLens term: a concept the Lens showed that you missed in a game. Blind spots are queued and brought back a few days later until you stop missing them.
Break of structure (BOS): A candle closes beyond the last confirmed, unbroken swing in the direction of the trend. It is read as continuation. A wick through the level does not count. Full page: break of structure.
Breaker block: A failed order block where price first traded beyond the old extreme that stood before the block, taking the liquidity there, and a candle then closed through the block. The old zone is then watched from the other side. See breaker and mitigation blocks.
Buy-side liquidity (BSL): Buy orders assumed to rest above swing highs and equal highs, mostly the stops of traders who are short. On a ForexLens chart the Lens marks it above every swing high.
Change of character (CHoCH): A candle closes beyond the last confirmed, unbroken swing against the trend. It is read as the first sign the trend may be turning. A close exactly on the level is not a break. Full page: change of character.
Cross pair: A currency pair that does not include the US dollar, such as EUR/GBP or GBP/JPY. Crosses usually have wider spreads than the majors.
Dealing range: The most recent swing high and swing low that still contain price, with no later candle trading beyond either. Its midpoint is equilibrium, with premium above and discount below. See premium and discount.
Dealer: A bank or non-bank firm that quotes two-way prices to clients, earns the spread, and manages the inventory those trades leave behind. You can play the role in The Dealer's Book.
The Desk: The free practice area on ForexLens: a simulated chart and a play money account, with the Lens available. A session ends with a review of your process, not your result.
Discount: The lower half of the dealing range, below equilibrium. SMC traders read it as the cheap side, where they prefer to look for buys.
Displacement: A forceful candle. The ForexLens rule: its body is at least twice the average high to low range of the ten candles before it, and at least 60% of its own range. Full page: displacement.
Distribution: The third phase of the power of three: the real move of the day, running from the end of the manipulation to the close of the session.
Draw on liquidity: The pool price is expected to head for next. The ForexLens rule: the nearest resting pool on the side of the last structure break, beyond the last close. Full page: draw on liquidity.
Drawdown: The fall in an account from a peak to the following low, usually given as a percentage. Even a sound method produces drawdowns, and deep ones are hard to recover from.
Equal highs (EQH): Two or more swing highs at nearly the same price. In ForexLens a later high counts when it stops at, or within 2 pips short of, the first, with nothing trading through. Read as a visible pool of buy-side liquidity.
Equal lows (EQL): Two or more swing lows at nearly the same price, the mirror of equal highs. A later low counts when it stops at, or within 2 pips short of, the first. Read as a pool of sell-side liquidity.
Equilibrium: The 50% level of the dealing range, halfway between its high and low. Price above it is in premium, price below it is in discount.
Expectancy: The average result per trade over many trades: win rate times average win, minus loss rate times average loss, after costs. A positive figure on a small sample proves little.
External liquidity: Pools resting beyond the two swings that bound the current range: where the last leg that broke structure began and where it ended. Compare internal liquidity. See internal and external liquidity.
Fair value gap (FVG): A three-candle gap. Bullish when the low of the third candle is above the high of the first, bearish when the high of the third is below the low of the first. Touching wicks are not a gap. Full page: fair value gap.
Floor: A stage of the ForexLens curriculum. The Core tier has six: Structure, Liquidity, Imbalance, Value, Time and The Model. Each opens as you level up. See all games.
Fractal: The pattern that defines a swing. ForexLens uses strength 2: a high strictly above the two highs before it and the two after it, or the mirror for a low.
Higher high (HH): A swing high above the previous swing high. Together with higher lows it describes an uptrend.
Higher low (HL): A swing low above the previous swing low. In an uptrend, the last higher low is the level whose break would be a change of character.
Higher timeframe bias: The direction assumed for the larger move, taken from the last structure break on a higher timeframe such as the daily or one hour chart. See multi-timeframe alignment.
ICT: The name under which much of the smart money vocabulary was popularised among retail traders. ForexLens describes the ideas neutrally, as fixed rules, and names no teachers.
Imbalance: A stretch of price crossed so quickly that little two-sided trading took place. On a chart it shows as a fair value gap. Also the name of the third floor of the course.
Inducement: An obvious level said to bait early entries before the real move. The ForexLens rule: the nearest resting pool between price and the most recent unmitigated order block. Full page: inducement.
Internal liquidity: Pools at the smaller swings inside the range, and for many SMC traders unfilled fair value gaps too. The idea is that price alternates between internal and external liquidity.
Judas swing: A fake move at the start of a session: the first move out of the Asia range takes one side, then a later candle closes beyond the other. Full page: Judas swing.
Kill zone: A window of the day when SMC traders expect the important moves. ForexLens uses New York time: Asia 20:00 to 00:00, London 02:00 to 05:00, New York 07:00 to 10:00. Full page: kill zones.
The Lens: The ForexLens overlay that reveals what the rules find on a chart: resting liquidity, gaps, the dealing range. You mark the chart first, then the Lens shows the answer and the rule that decided it.
Leverage: Controlling a position larger than your deposit. At 30 to 1, one unit of margin holds thirty units of currency. It multiplies losses exactly as it multiplies gains.
Liquidity: In SMC, resting orders, especially stops above highs and below lows. To a dealer it means something else: how much can be traded without moving the price. Full page: liquidity.
Liquidity pool: A price level where orders are assumed to cluster: above a swing high or equal highs, below a swing low or equal lows, or at a session high or low.
Liquidity provider: A firm that supplies prices others can trade on. In foreign exchange these are dealing banks and non-bank electronic market makers. Retail platforms often hedge with one.
Liquidity sweep: The first candle whose wick trades beyond a pool. If it closes back at or inside the level it is a raid, if it closes beyond it is a break. Full page: liquidity sweep.
London session: The European trading day, the most active for most major pairs. The ForexLens London kill zone is 02:00 to 05:00 New York time.
Lot: The unit of trade size. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
Lower high (LH): A swing high below the previous swing high. In a downtrend, the last lower high is the level whose break would be a change of character.
Lower low (LL): A swing low below the previous swing low. Together with lower highs it describes a downtrend.
Major pair: By long habit, one of seven heavily traded pairs that all include the US dollar, such as EUR/USD, USD/JPY and GBP/USD. See the pair pages.
Manipulation: The second phase of the power of three: the fake move out of the accumulation range, running to its extreme. The name is SMC vocabulary for a shape on the chart, not evidence of intent.
Margin: The deposit a broker holds against an open position: the notional value of the trade divided by the leverage. It is collateral, not a fee and not the most you can lose.
Market maker: A firm that continuously quotes both a bid and an ask and trades with whoever accepts. In foreign exchange, another word for a dealer.
Market structure: The sequence of swing highs and lows and the breaks between them. Higher highs and higher lows describe an uptrend, lower highs and lower lows a downtrend. Full page: market structure.
Mitigation: Price returning to a zone. A fair value gap is mitigated when a later wick reaches its near edge. An order block is mitigated when price trades back into it after the break.
Mitigation block: A failed order block where price stopped short of the old extreme that stood before the block, and a candle then closed through the block. Compare breaker block.
New York session: The North American trading day. Its first hours overlap with London, usually the busiest part of the day. The ForexLens New York kill zone is 07:00 to 10:00 New York time.
Optimal trade entry (OTE): The 62% to 79% retracement of the range leg, with 70.5% as its midpoint. SMC traders look for entries there with a stop beyond the swing the leg started from. Full page: optimal trade entry.
Order block (OB): The last opposite-colour candle before the first displacement candle of a leg that broke structure, at most five candles back. The zone is its full high to low. Full page: order block.
Order book: The list of resting buy and sell orders on a trading venue, by price. Foreign exchange has many venues and no single book, and retail charts do not show one.
Order flow: The stream of buy and sell orders reaching the market. Together with news, it is what moves price. A candle chart shows its result, not who sent the orders or why.
OTC (over the counter): Traded directly between parties or through dealers instead of on a central exchange. Foreign exchange is an OTC market, which is why there is no single official price or volume.
Overfitting: Tuning rules until they match past data closely, noise included. An overfit strategy looks excellent in a backtest and falls apart on data it has not seen.
PD array: Short for premium and discount array: a collective name some SMC teachers use for the zones price may react to, such as order blocks and fair value gaps, sorted by where they sit in the dealing range.
Pip: The standard unit of price movement: 0.0001 for most pairs, 0.01 when the quote currency is the Japanese yen. More in the forex FAQ.
Pipette: A tenth of a pip: the extra final digit most platforms quote. EUR/USD is shown to five decimals, yen pairs to three.
Position sizing: Choosing trade size from the money you are prepared to lose and the distance to your stop, so that a loss is a fixed, small share of the account. Full page: risk and position sizing.
Power of three: The reading of a day as three phases: accumulation, manipulation and distribution. Full page: power of three.
Premium: The upper half of the dealing range, above equilibrium. SMC traders read it as the expensive side, where they prefer to look for sells.
Quote currency: The second currency in a pair. In EUR/USD it is the US dollar. Profit, loss and pip value are first counted in the quote currency.
Raid: A sweep that fails to hold: a candle trades beyond a pool with its wick and closes back at or inside the level. Read as stops taken and price rejected.
Range: A stretch where price moves sideways between a high and a low without breaking structure in either direction. See also dealing range.
Risk-reward ratio: The distance from entry to target divided by the distance from entry to stop. A ratio of 2 means the planned gain is twice the planned loss. It says nothing about how often the target is reached.
Sell-side liquidity (SSL): Sell orders assumed to rest below swing lows and equal lows, mostly the stops of traders who are long. On a ForexLens chart the Lens marks it below every swing low.
Session high and low: The highest and lowest prices made during a session window. SMC traders treat both as liquidity pools that a later session may take.
Slippage: The difference between the price you asked for and the price you got. It is largest in fast or thin markets, and stop orders can fill well beyond their level.
Spread: The gap between the bid and the ask. It is the cost of trading immediately and the main income of a dealer. It widens around news and in quiet hours.
Stop hunt: The retail name for a spike through an obvious level that triggers stops and then reverses. On the chart it is a raid. Whether anyone intended it cannot be read from candles.
Stop loss: An order that closes a position if price reaches a set level, to limit the loss. In a fast market it can fill beyond that level.
Survivorship bias: Judging a method from the traders and trades still visible. Losers stop posting and losing trades are not shared, so what remains looks better than the truth.
Swing high: A candle whose high is strictly above the highs of the two candles before it and the two after it. Equal neighbours make a plateau, not a swing. Full page: swing highs and lows.
Swing low: A candle whose low is strictly below the lows of the two candles before it and the two after it. It is confirmed when the second candle after it closes.
Take profit: An order that closes a position at a set target price. In the SMC model the target is usually the opposing liquidity pool.
Timeframe: The period each candle covers, such as five minutes, one hour or one day. Every lower timeframe candle sits inside a higher timeframe one.
Trend: The direction of structure: up while price makes higher highs and higher lows, down while it makes lower highs and lower lows. In ForexLens the trend flips on a change of character.
Variance: The spread of outcomes around the average. Traders with an identical method and an identical edge still finish far apart, as Reality Lab shows with 200 simulated traders.