The institutional market framework powering the SiGmatry AI analysis engine.
Market Structure · Break of Structure · Change of Character · Order Blocks · Fair Value Gaps · Power of Three · Liquidity · Volume Profile · Multi-Timeframe Analysis · How SiGmatry integrates all layers
Smart Money Concepts (SMC) is a market analysis framework designed to interpret how large financial participants — banks, hedge funds, and institutional liquidity providers — influence price movements.
Unlike retail approaches that rely on lagging indicators, SMC focuses on price action, market structure, liquidity behavior, and order flow dynamics. These elements help identify areas where institutional activity may be shaping market direction.
SiGmatry integrates these concepts into its multi-layer AI analysis engine to produce structured market intelligence with a composite confidence score.
Market structure describes how price forms directional bias through sequences of swing highs and lows. It is the foundation of all SMC analysis — before evaluating any other layer, the structural context must be established.
A Break of Structure occurs when price closes beyond a previous swing high in an uptrend, or beyond a previous swing low in a downtrend. BOS confirms continuation of the current directional bias and indicates that institutional momentum remains active in that direction.
SiGmatry's engine scans the last 50 candles for swing points and evaluates whether the most recent close has breached a prior structural level. A confirmed BOS adds to the composite score.
A Change of Character represents the first structural indication that momentum may be shifting. It occurs when price breaks structure in the opposite direction of the prevailing trend for the first time — suggesting a potential transition in institutional intent rather than a simple retracement.
CHoCH is weighted separately in the SiGmatry score because it often precedes the most significant directional moves.
An Order Block is a price zone where significant institutional activity is believed to have occurred. Specifically, it is identified as the last candle moving against the direction of a subsequent strong impulsive move.
SiGmatry detects Order Blocks by scanning for candles followed by moves of at least 2.5× the candle body in one direction across the last 100 candles, then evaluates whether current price is within or approaching that zone.
A Fair Value Gap represents a price imbalance created during rapid institutional movement. It forms when a strong directional candle creates a gap between the surrounding candles — an area where no trading occurred on both sides of the market.
Markets frequently return to these zones to fill the imbalance before resuming their directional move. FVGs are most significant when they form near key structural levels or within Order Block zones — this confluence is weighted higher in the SiGmatry scoring model.
When an FVG and an Order Block occupy overlapping price zones, SiGmatry treats this as a high-confluence area. The AI assigns additional weight when price approaches a zone where both indicators align.
Power of Three describes a three-phase price delivery model observed across all timeframes. It reflects how institutional participants build, manipulate, and distribute positions in a structured sequence.
SiGmatry's AI classifies the current PO3 phase by analyzing the relationship between recent average range, body size, and wick structure. A Distribution phase in the direction of other confirming layers significantly increases the composite confidence score.
Liquidity refers to clusters of resting orders within the market — primarily stop-loss orders placed by retail participants at predictable locations.
Understanding liquidity placement helps explain why markets often move toward these levels before reversing or continuing a trend. SiGmatry scans for equal highs and equal lows within a ±3 pip tolerance, then evaluates whether a recent candle has swept through that level and closed back inside — a "confirmed sweep" pattern that carries significant weight in the analysis score.
Volume Profile is a statistical tool that maps trading activity across price levels. SiGmatry approximates this using candle range as a proxy for activity, distributing weight across 20 price buckets within the recent range.
Price trading above the POC within the Value Area is interpreted as bullish. Price trading below the Value Area Low suggests significant bearish displacement and potential for a return to fair value.
A core principle in SMC is that lower timeframe moves should be interpreted in the context of higher timeframe structure. A bullish setup on a 15-minute chart carries significantly less weight if the 4-hour and daily charts are in a bearish structural phase.
SiGmatry automatically fetches H4 and D1 candle data for every analysis request, computing bias, trend structure, and MA20 position on each higher timeframe. The alignment between timeframes directly adjusts the composite score:
SiGmatry does not evaluate each SMC concept in isolation. The platform processes all structural factors simultaneously and produces a single composite score reflecting the degree of confluence across all active layers.
The analysis engine evaluates the following inputs for each request:
The resulting composite score is evaluated against a confidence threshold before a directional bias is assigned. This approach ensures that a bias is only generated when meaningful confluence exists across multiple independent layers.
SMC setups carry higher analytical weight during active institutional sessions — particularly the London Open (07:00–09:00 UTC) and New York Open (12:00–14:00 UTC) kill zones. Analysis generated during the Asia session or off-hours will reflect lower confidence scores due to reduced institutional participation.
This guide is provided for educational and informational purposes only. Smart Money Concepts, like all market analysis frameworks, does not guarantee any particular outcome. All market analysis involves uncertainty. SiGmatry provides AI-generated analytical insights and should not be interpreted as financial advice or a recommendation to buy or sell any instrument.
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