I will show you how to set a safe stop loss easily, trading Smart Money Concepts. I will explain when exactly you should open a trade and how to identify a safe stop loss level in a second.

Learn the best stop loss strategy in SMC trading Forex.

The Key

The essential foundation of a safe stop loss in Smart Money Concepts trading is a safe entry. Opening a trading position too early or too late, any stop loss strategy, will not protect you.

For that reason, first, let me explain how to spot the best moment to enter the trade.

Best Entry is SMC

In Smart Money Concepts trading, we assume that the institutional traders - the smart money is manipulating the markets, trapping retails traders and grabbing their liquidity.

To find a safe entry, you will need to wait for a manipulation first. You will need to wait for a clear trap before you open any trade. Doing so, we will trade with Smart Money, entering the market when they finished their dirty work.

The strategy that I use to spot market manipulations is based on liquidity analysis. I analyze significant liquidity zones, and I am waiting for traps after their tests.

Best Entry and Stop Loss in Supply Zones

Examine a significant liquidity supply zone on GBPUSD forex pair. After its test, the price went beyond that, staying for at least 3 hours above.

That can be a market manipulation, and with that, Smart Money can grab a liquidity of the sellers. But at the same time, it can easily be a breakout too. The fact that the price updated the highs may suggest that uptrend will continue. At that moment, it is not clear whether we see a manipulation or not.

So for now, it is not a good moment to enter.

Wait For This

After completing trapping the retail traders, Smart Money always show their presence. A formation of a clear imbalance will be used as a confirmation of a manipulation.

A formation of a bearish imbalance candle and a return of the price within a liquidity zone confirms that a bullish violation of a supply zone was a trap. That is our best moment to sell and you should enter immediately after this imbalance candle closes.

Best Stop Loss After Bull Trap

But where should be your safe stop loss. Your safe stop loss will be 0.5 ATR from the highest high of the trap. Why is that the best stop loss?

** Remember that Smart Money may continue manipulating the market.

And the price dropped significantly then. Such a stop loss placement provides a protection against minor price fluctuations before the price will finally move in the desired direction.

Best Entry and Stop Loss in Demand Zones

Now, let me show you how to place a safe stop loss after a test of a demand zone.

USDJPY tested a strong liquidity demand zone. We see a that the price went below that then, updating the low. This violation can easily be a trap and manipulation.

At the same time, however, it can be a valid breakout.

Wait For Smart Money

To confirm, that we are facing a bearish trap, we will need to wait for a clear appearance of Smart Money.

A formation of a buying imbalance candle will confirm, that Smart Money completed grabbing a liquidity of the sellers and with a high probability the price will rise.

A close of such an imbalance candle will be your best moment to buy.

Best Stop Loss After Bear Trap

Your safe stop loss will be 0.5 ATR from the lowest low of a liquidity grab.

Such a stop loss strategy will help you to avoid consequent price manipulations.

And the price went up significantly then.

Main Rule

Remember that in Smart Money Concepts trading, the main element of a safe trading position is safe entry. Only after you learn to spot the safest moment to enter your trade, this stop loss strategy will help you to protect your position. Use that to avoid losses, and good luck to you in trading SMC in Forex.