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ICT vs SMC: Which is better for trading crypto?
Intro
Smart Money Concepts and Inner Circle Trading are two popular trading frameworks to conduct market analysis and build custom systems on top of those two approaches. For crypto traders, SMC and ICT have brought an infinite amount of possibilities, in an equal manner for those who trade aggressively as for those who seek long-term outcomes.
While Smart Money sets the foundations for market structure understanding, Inner Circle goes beyond and develops a terminology along a sophisticated method to get into and out of the market more effectively.
Through the following sections, this article will try to establish a friendly difference between both showcasing their key correlations and how to leverage both methods to go ahead with the crypto market successfully.
Brief overview of Inner Circle Trading (ICT)
Developed by Michael J. Huddleston, Inner Circle Trading concepts try to serve as a trading framework to comprehend not only the price action of a market but also its background.
ICT concepts help resolve complexity in the market, providing a terminology for several scenarios of trading.
Like SMC, manipulation and institutional trading play a key role for the understanding of Inner Circle Trading strategy. This trading method not only traces resistance and support levels but also makes an effort to decipher how institutional traders will behave over those levels.
Brief overview of Smart Money Concepts (ICT)
Smart Money Concepts are essentially a set of conceptual tools referring to and tracking the capital placed in the market, having as its main focus institutional investors, market mavens, central banks, professional traders, and, in the case of cryptocurrencies, the whales.
These concepts serve as the foundation for market structure analysis, give support and resistance levels a sense of meaning, extend the application of price action, and help track the market from the very viewpoint of professionals and institutional traders.
Key Differences: ICT Vs. SMC
Let’s use a comparative table to showcase the key differences between both methods.
| Table | ICT | SMC |
| Focus | ICT incorporates technical analysis with a focus on identifying key levels, like support and resistance, institutional footprint through concepts like "algo trading", and psychological levels with round numbers. | SMC emphasizes understanding price action and interpreting the "footprints" left by institutional activity, including supply and demand zones, order flow analysis, and market structure |
| Structure | ICT utilizes a specific framework with tools like the "Fair Value Gap" | SMC offers a more flexible framework that focuses on |
| (FVG) and specific chart patterns to identify potential entry and exit points. | interpreting raw price movements and identifying underlying market dynamics. | |
| Learning curve | ICT requires learning a specific terminology and trading philosophy. Paid educational resources are available | SMC has a steeper learning curve as it requires a deeper understanding of price action and market behavior. |
| Advantages | Offers a structured approach with clear entry and exit signals. May be easier to grasp for beginners familiar with technical analysis. | Offers a versatile framework applicable to any market, including crypto. Focuses on core principles of market dynamics. |
| Disadvantages | Relies on specific indicators and patterns. Requires memorizing ICT's terminology and trading concepts. | More subjective interpretations of price action can lead to conflicting signals. Requires more experience and practice to master. |
Choosing the Right Approach
- For Beginners: If you're new to trading, ICT's structured approach with clear signals might be easier to grasp initially.
- For Experienced Traders: If you have a solid understanding of technical analysis and want a deeper understanding of market behavior, SMC might be a better fit.
- Combine Strategies: You can consider combining elements of both approaches. Use ICT's key level identification with SMC's price action analysis for a more comprehensive view.
ICT Vs. SMC For Crypto Markets
Crypto markets are attractive for their increasing volatility, offering a wide range of opportunities every day. This aspect establishes a relevant difference from conventional markets, which tend to stay more quiet.
So, cryptocurrencies pose a different challenge for traders, how to overcome this quite different environment?
Market Considerations:
- Volatility: Crypto markets are highly volatile. Both ICT and SMC can be adapted for volatile markets, but proper risk management is crucial.
- Liquidity: Choose coins with sufficient liquidity to ensure easier entry and exit based on your trading signals.
Trader personality considerations:
- Risk tolerance: For both SMC and ICT, traders should maintain awareness of their own capabilities and limits. Knowing and defining the proper risk tolerance will guarantee the long-term survival of the trader's mind in the market.
- Psychological Factors: Avoid incurring on Fear of Missing Out (FOMO). The fast price movements in crypto can trigger impulsive trading decisions and cause potential losses.
Risk Management considerations:
- Develop a Trading Plan defining entry and exit points, risk tolerance, and overall trading strategy before entering any crypto trade.
- Starting small for beginners to test the strategies in real environments is recommended for gaining psychological strength, and managing potential losses in a volatile market.
- Stay Updated keeping yourself informed about market trends, news events, and technological advancements impacting cryptocurrencies.
Conclusion and call to action
Smart Money trading is in essence a framework to face the crypto market with a broader view. Inner Circle Trading (ICT) for its part developed a methodical approach that tries to make sense of the price movements beyond market structures.
Swing Points, Equal Lows/Highs, Fair Value Gaps, Discount and Premium Zones are some of the most popular concepts of this ICT. While SMC provides traders with conceptual tools to analyze the market aiming to make better-informed decisions, conduct research, and market scanning.
Altrady is an excellent crypto platform to start scanning the market and testing SMC along with ICT with a free trial account on paper trading.
Catalin is the co-founder of Altrady. With a background in Marketing, Business Development & Software Development. With more than 15 years of experience working in Startups or large corporations.