Every tool in this module is one piece of a single idea. Put together, they form a complete, repeatable setup. Here it is from start to finish, as a long trade. A short is the mirror image.
The six steps
- Bias. On the higher timeframe, structure is bullish and price is in discount of the higher-timeframe range. Only look for longs.
- Liquidity. On your trading timeframe, mark the obvious sell-side liquidity below (equal lows, the session low) and the buy-side liquidity above (equal highs, the previous day's high).
- Sweep. Wait for price to sweep the sell-side liquidity: a wick below the lows that closes back above.
- Shift. Wait for a bullish change of character with displacement, ideally leaving a fair value gap.
- Entry. Mark the order block (or FVG) that caused the shift. Check it's in discount of the new leg, ideally after any inducement has been swept. Enter on the return to it, stop below the sweep low.
- Target. Aim for the buy-side liquidity above. Take partial profit at the first obstacle if you like, and move the stop once structure confirms.
| Check | Yes / No |
|---|---|
| Higher-timeframe bias agrees with the trade | Required |
| Liquidity was swept before the shift | Required |
| CHoCH with displacement on the trading timeframe | Required |
| Entry zone is an order block or FVG that caused the shift | Required |
| Entry is in discount (long) or premium (short) | Strongly preferred |
| Inducement above the zone has been taken | Preferred |
| Trade is inside a killzone, clear of high-impact news (Module 6) | Preferred |
| Risk-to-reward is at least 2:1 to the target | Required |
Worked example
Bias: EUR/USD daily is bullish. Liquidity: equal lows at 1.0840 on the 15-minute chart; equal highs at 1.0905.
Sweep: London drops price to 1.0832 and closes back at 1.0845. Shift: a strong rally closes above the last lower high at 1.0866, leaving an FVG.
Entry: the order block at 1.0838–1.0846 is in discount. Buy limit at 1.0846, stop at 1.0829 (17 pips). Target: 1.0903, just under the equal highs: 57 pips, about 3.4R.
Key takeaways
- A complete SMC setup combines bias, liquidity, a sweep, a shift with displacement, an entry zone and a liquidity target.
- Enter at the order block or FVG that caused the shift, in discount for longs or premium for shorts.
- Stops go beyond the sweep; targets go to the opposing liquidity.
- Use a written checklist, trade only complete setups, and track the results.