Episode 0: Why can't you win with indicators? The story of FX and SMC [Series Start]
Nice to meet you, I am nao.
In this series, I will explain “SMC (Smart Money Concept)” from zero.
This article has been rewritten.
In the previous version I wrote, “the big players harvest personal stop-losses.” It’s an easy-to-understand explanation, and it isn’t wrong to say so. However, if you get stuck at that explanation, some people will hit a wall. Since this is the entry to the series, I’m correcting the most important part from the ground up.
A common explanation is that the calculations don’t add up
“The big players come to hunt personal stop-losses” — when you start learning SMC, you’ll surely encounter this explanation.
It was early in the series, so honestly I went along with what others were saying.
But I’ll write what I’ve thought since then.
Global FOREX trading is about $9.6 trillion per day. Of that, retail trading accounts for about 2.5% (BIS April 2025 survey). The big players move hundreds of billions, even trillions of yen. Even if you gathered all individual stop-loss orders, that volume would be far from enough.
In other words, the explanation that “the big players target individuals” is inaccurate in terms of magnitude. Even if they target us, it isn’t worth it for the big players.
So what is really happening
First, the big players are not a single organism.
Banks, funds, pensions, central banks. Each has different objectives, time horizons, and scales of funds. These big players are sometimes allies, sometimes enemies. We individuals are not even on their radar.
Then are the big players invincible? Not necessarily.
Here’s the interesting part: as soon as a big player buys, they become immobilized.
If they try to sell, their own selling pushes prices down. When prices fall, the value of their remaining positions also falls. So big players either defend that level or gradually step back. Moreover, large orders leave traces on the chart. If other big players see those traces, they can read where they intend to defend.
Being big is a weakness in itself.
In the market, big players eating other big players happens routinely. In 2022, one of the world’s largest nickel producers could not exit a short position, and the price tripled in three trading days. And in this story,not a single individual appears.
The real reason you can’t win with indicators
So how does this connect to indicators?
When we use indicators, it’s to decide “where to look.” Moving averages, RSI, horizontal lines — they narrow down the spots in price movement that deserve attention.
Highs and lows that everyone can see are visible to all, regardless of the tools used. Sometimes a moving average overlaps there, neat numbers align, or a Fibonacci level overlaps as well. The more supporting evidence piles up, the stronger the conviction and the more orders are placed.
And big players can only absorb large orders when there is a stack of orders. So big players target those areas.
There are places you think, “This is absolute.” You enter with conviction and then you’re wiped out with a stop-out. Immediately after, prices move back in the direction you expected — “What, the direction was right after all.” You get pulled back after a stop-out.
The direction was correct. However, absolute-belief places are crowded with others’ stop-outs just a little ahead. Those are the rare places where large volumes can be handled. So absolute places tend to give a false move before the real reversal.
The reason indicators don’t win isn’t the tool’s performance. It’s that entries and stop losses are placed in the same spots as many others.
You are not even being targeted
In academia, there is a term “predatory trading.” However, to be preyed upon, three conditions must be met: a large position, a forced exit, and the fact that the other side knows about it.
Our lot does not meet any of these three. There’s no reason for the big players to target us.
There are traps, though. They aren’t for us. They’re for big players. We just happened to place our stop where a losing big player placed theirs. Not a target, but a stray shot.
It took me a long detour to realize this. When you think you are being targeted, the market looks like an attack. After realizing you’re standing at the wrong place, you shift to the idea of choosing where to stand.
SMC is reading the traces
Who targeted whom cannot be determined just by looking at the chart.
What you can determine is that traces of large funds have entered the market.
However, the same traces, depending on whether the big player who left them defends them or is forced back, change the future path. Therefore traces are “readable to some extent.” The precision of how you read them — and the accumulation of discernment — is what this series will teach from here.
SMC is a method of constructing “what happens next where” from traces — market structure, order blocks, fair value gaps, liquidity. It is not reacting after a delayed indicator like RSI, Bollinger, or MA; it is to prepare before it moves. I believe this shift in thinking is the essence of SMC.to prepare before it moves. I believe this shift in thinking is the essence of SMC.
It may sound difficult, but if you understand it step by step, you will surely be able to use it.
As understanding progresses, the scenery will gradually change. It’s a matter of how you view the chart, lol.
Summary: today’s 3 main points
① Individuals are about 2.5% of the market. What big players target is not individuals, but the “place” where orders have accumulated.
② Not winning with indicators isn’t a matter of tool performance. Entries and stop losses are placed in the same spots as many others, so you get swept up in false moves.
③ SMC is a method to read traces left by big players and prepare before moves.
Next time, I will explain how to read market structure (HH, HL, LH, LL). Starting from knowing where you are standing on the chart at this moment.
nao｜FX full-time trader and EA developer
I started spreading SMC after discovering that my own winning pattern, learned by instinct, was later called “SMC.”
Specializing in GOLD scalping and day trading. While selling EAs “tundere series” on GoGoJungle,
I developed the SMC visualization indicator “nao_smc_mt5” that mirrors the same judgment criteria as this series, directly onto the chart.
From structure, zones, 0.705, to the next break forecast — onto the chart at the moment you open it.
