Order block, FVG, liquidity: the Smart Money Concepts glossary

Updated on September 9, 2026

Smart Money Concepts (SMC)

A technical analysis approach built on one simple premise: large players cannot enter the market quietly. An institutional-sized order needs someone on the other side, so it leaves traces on the chart. The goal is to spot those traces and position yourself in the same places, instead of following indicators calculated on past data.

The vocabulary below comes largely from the teaching published under the Inner Circle Trader (ICT) name, then picked up and renamed by many others. That matters, because these terms are not standardised. Two educators can give two slightly different definitions of the same word.

Market structure

The sequence of highs and lows, read in order. A bullish structure strings together higher highs and higher lows. A bearish structure does the opposite. As long as that sequence holds, the trend is considered intact.

This is where any SMC reading starts: before looking for an entry zone, you establish which way the market is moving. A perfect buy zone inside a bearish structure is still a counter-trend buy.

BOS (Break of Structure)

A high broken in a bullish structure, or a low broken in a bearish one. A BOS confirms the trend already in place: the market has just taken one more step in the direction it was already going.

So a BOS is not an entry signal. It is a confirmation of context, which then allows you to look for an entry in that direction on the next pullback.

CHoCH (Change of Character)

The first break in the opposite direction to the trend in place: a low broken while the structure was bullish, or a high broken while it was bearish.

This is the single most useful distinction in this glossary, and the one most often confused. A BOS says « this continues », a CHoCH says « something changed ». A CHoCH does not guarantee a reversal, it signals that the sequence which was holding no longer holds, and that the chart needs re-reading.

The rule that separates the two, and the point almost nobody explains, are covered on our BOS and CHoCH page.

Order block (OB)

The last opposite-direction candle right before a decisive move that breaks structure. On a bullish departure, it is the last bearish candle before the impulse. The reading applied to it: this is where the large orders were placed, since this is where the move started from.

Its practical value is what happens when price returns. If the market comes back to that order block, the assumption is that it is returning to a zone where buying interest remains, making a continuation more likely there than elsewhere. Not all order blocks are equal: freshness, the strength of the move they produced and their position within the structure all make a difference.

The three conditions that separate an order block from an ordinary candle, and the two ways of drawing it, are covered on our dedicated order block page.

Fair Value Gap (FVG), or imbalance

A hole left by three consecutive candles, when the far edge of the first and the far edge of the third do not overlap. In plain terms: price moved so fast that it skipped an entire zone without trading much in it.

It is called an imbalance because supply and demand never properly met in that zone. The common idea is that the market tends to come back and « fill » the gap later. That is an observed tendency, not a rule: plenty of fair value gaps are never filled.

The exact rule, what filling it means and how it differs from an order block are covered on our dedicated fair value gap page.

Liquidity, BSL and SSL

Liquidity here means the places on the chart where other traders’ orders are clustered, and their stop losses in particular. Those places are predictable, because everyone puts their stops in the same obvious spots.

• BSL (buy-side liquidity) sits above highs. That is where sellers’ stops and pending breakout buy orders are.
• SSL (sell-side liquidity) sits below lows. That is where buyers’ stops and pending sell orders are.

The SMC reasoning is that a large buyer needs sellers on the other side. It is therefore in their interest for price to dip below a low and trigger the stops sitting there, because those triggered stops supply exactly the counterparty they need.

Sweep, or liquidity grab

The moment price actually goes and takes that liquidity, then turns back the other way. Visually, it is a wick pushing clearly beyond a high or a low, followed by a close on the other side of that level.

It is often what feels like « the market took my stop and then left without me ». In an SMC reading it is not bad luck: it is the very mechanism by which a large order finds its counterparty, and it is one of the most watched signals before an entry.

Why your stops are the target, and how to tell a sweep from a real break, are covered on our liquidity sweep page.

Premium, Equilibrium, Discount

A three-way split of the most recent move. You measure from the low to the high, mark the midpoint, and that midpoint is equilibrium. Above it you are in premium: price is expensive relative to that move. Below it you are in discount: it is cheap.

The rule drawn from it is deliberately blunt: look to buy in discount and sell in premium. It mostly works as a guardrail, stopping you from buying at the very top of a move just because the trend is up.

POI (Point of Interest)

A catch-all term for any zone you have decided to watch: an order block, a fair value gap, a former high, or a combination of all three. It is not a concept in its own right, it is shorthand.

Worth knowing, because you meet it everywhere and it can suggest a precise mechanism when all it means is « the zone I care about here ».

Mitigation

What happens when price returns to an order block and the zone gets « consumed »: the orders waiting there have been filled. An already mitigated order block is generally treated as less reliable than an untouched one, since there is less interest left to defend it.

That is why the freshness of a zone matters as much as its quality. A perfect zone that has already been visited three times has little left to offer.

HTF and LTF: reading across timeframes

Higher timeframe and lower timeframe. An SMC reading almost always spans several timeframes at once, with a fairly consistent division of labour between them.

Higher timeframes give context and direction, middle ones point to the zone you want to act in, lower ones handle the trigger and the stop placement. The classic beginner mistake is inverting that hierarchy: taking an entry on a tiny timeframe against what the higher one says, and ending up on the wrong side of a move that was readable all along.

What this vocabulary does not tell you

Three honest caveats, because they are almost always missing from glossaries like this one.

First, these terms are not standardised. No authority defines what an order block is, and you will find competing definitions depending on the source. If two tools show you different zones on the same chart, it does not necessarily mean one of them is wrong.

Second, none of these concepts predicts anything. They are ways of describing what has already happened on a chart and drawing a hypothesis from it. A hypothesis is regularly wrong, and trading carries a risk of losing capital.

Third, the reading stays subjective. Two competent traders can identify two different structures on the same chart. That is exactly what makes this slow to learn, and why an automated reading, applying the same rules every time, delivers at least one thing the human eye delivers poorly: consistency.

How AlphaGPT uses these ideas

Since this is our subject, we may as well say what we do with them. AlphaGPT applies these concepts by computation rather than by eye: detecting highs and lows, structure breaks, order blocks, fair value gaps, liquidity zones and when they get taken, then splitting premium and discount, across several timeframes at once.

The output is not an annotated picture but a numbered plan, with an entry, a stop, targets and a position size matched to your risk. And when nothing worthwhile comes out, the analysis says so instead of inventing a signal.