Each of the first seven lessons gives you one test. On its own, any of them can justify almost any trade, because a chart always has some gap, some block or some swept low. Put in a fixed order, they filter out most charts and tell you exactly where the entry, stop and target go.
What you will learn
- How to order the SMC tests from the higher timeframe down to the entry
- How to write each test as a yes-or-no question
- How to size the plan to the Classic and Direct loss limits
- How one trade looks when it is run through every step
Why write SMC as a checklist?
SMC has a lot of named parts, and the more parts you know, the easier it is to find a reason for a trade you already wanted to take. A checklist fixes the order and needs a yes at every step before you place an order. One no and the trade is off, however good the chart looks.
It also makes your journal useful: when a trade loses, you can see whether a step failed or the loss was an ordinary one. The trading journal lesson shows how to record that.
The checklist
Work down the list in order. Every answer must be yes.
- On the 4-hour chart, did the last break of structure go in my direction? (lessons 1 and 2)
- For a long, is price in the discount half of the 4-hour dealing range, or in the premium half for a short? (lesson 6)
- Is there a clear pool of liquidity in my direction, such as equal highs or yesterday's high, at least twice my stop distance away? (lesson 3)
- Is it inside the kill zone I trade? (lesson 7)
- Has price first taken liquidity on the other side, such as the Asian low or a recent swing low?
- On the 15-minute chart, has displacement closed beyond a swing the other way, a change of character?
- Did that move leave a fair value gap or an order block to enter from? (lessons 4 and 5)
- Does the stop sit beyond the extreme of the sweep, and does the size come from my fixed risk per trade?
- If this trade loses in full, am I still inside my personal daily stop?
Then write down when you cancel an unfilled order: when the kill zone ends, the target liquidity is taken before you fill, or a candle body closes beyond the far edge of your entry zone.
Decide one way to manage the trade once it is open and keep it. Either leave the stop and target alone, or move the stop to your entry once price has moved 1R in your favour, where 1R is the amount you risk on the trade. Switching between them makes your results impossible to compare.
Size the plan to the CMC Funded limits
The account's limits decide how much each trade may cost. Work backwards from the daily loss limit and the maximum loss, using the method from Write a trading plan that fits your challenge limits.
- On a $10,000 Classic account, the daily loss limit is $500 and the floor is $9,000. At 0.5% risk, $50 a trade, that is 10 losses to the daily limit and 20 to the floor.
- On a $10,000 Direct account, the daily loss limit is $400 and the floor is $9,400. At 0.4% risk, $40 a trade, that is 10 losses to the daily limit and 15 to the floor.
- On a $25,000 Direct account, the daily loss limit is $1,000 and the floor is $23,500. At 0.4% risk, $100 a trade, that is again 10 and 15.
The daily loss limit is measured on equity, so open positions count against it, and reaching it ends the account with no warning stage. Set a personal daily stop at about 30% of the limit, which is three full losses in each case above: $150, $120 and $300.
Leverage is chosen at purchase, from 1:10 to 1:500. When you size from the stop distance, leverage changes the margin a trade ties up, not the dollars you lose at the stop. Higher leverage magnifies both gains and losses.
There is no time limit on CMC Funded challenges. Direct's 10% target on $25,000 is $2,500, which is 25 times a $100 risk, so a checklist that fires only twice a week calls for patience, with the risk per trade left where it is.
One trade, run through the checklist
The account is a $25,000 Direct account risking $100 a trade. EUR/USD moves $10 a pip on one standard lot.
- On the 4-hour chart, a leg from 1.0800 closed above the 1.0960 high and topped at 1.1000. That is a bullish break of structure. Yes.
- The dealing range is 1.0800 to 1.1000, with equilibrium at 1.0900. Price is at 1.0880 overnight, in discount. Yes.
- Yesterday's high at 1.0942 is buy-side liquidity above. Yes, if the stop comes out at no more than half the distance to it.
- It is 07:00 UK, the start of the London kill zone. Yes.
- The Asian low is 1.0862. At 07:25 UK, price trades to 1.0855 and closes back above it. Yes.
- A large 15-minute candle closes at 1.0889, above the 15-minute swing high at 1.0885. Yes.
- The move leaves a fair value gap from 1.0868 to 1.0878, with a midpoint at 1.0873. It sits in discount and overlaps the 4-hour OTE zone of 1.0842 to 1.0876. Yes.
- A buy limit at 1.0873 with the stop 5 pips under the sweep low, at 1.0850, is 23 pips of risk. $100 ÷ 23 pips is $4.35 a pip, rounded down to 0.43 lots, or $4.30 a pip, so a stop-out costs $98.90. The target at 1.0940, just under yesterday's high, is 67 pips away, worth $288.10 and about 2.9 times the risk. Yes.
- A $98.90 loss would leave the day inside the $300 personal stop and the account $1,401.10 above the $23,500 floor. Yes.
The order fills at 08:10 UK. From there, either the stop costs $98.90 or the target pays $288.10, before trading costs. If 10:00 had passed with no fill, you would cancel the order and stop for the session, whatever the chart did next.
The position size calculator checks the lot size, and the rules page lists the limits for every account size.
Check your understanding
On a $10,000 Direct account at 0.4% risk, how many full losses fit before the daily loss limit, and before the floor?
$40 a trade. The $400 daily limit allows 10 losses, and the $600 above the $9,400 floor allows 15.
The 4-hour trend is bullish, price is 70% of the way up the 4-hour range, and London sweeps the Asian low then breaks structure up. Do you buy?
No. Step 2 fails: 70% of the way up the range is above equilibrium, in premium, so a long does not qualify, however clean the sweep looks.
Your buy limit has not filled, and price reaches the target liquidity at yesterday's high first. What do you do?
Cancel the order. The liquidity you were aiming for has been taken, so the reason for the trade has gone.
Key points
- Run the tests in a fixed order: higher-timeframe structure, premium or discount, target liquidity, kill zone, sweep, change of character, entry zone, size, daily stop.
- Every step must be a yes, and cancel rules are written down before the session.
- Size from the account's dollar limits: 10 full losses to the daily limit on each example account, with a personal stop at three.
- With no time limit, a checklist that fires rarely is fine.
Next: take the smart money concepts course quiz
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