Lecture 12: Combining SMC With News Events – Impact Of News On Institutional Flow

Introduction

News events are a major driver of volatility in the forex and financial markets. Institutional traders, including banks and hedge funds, use high-impact news releases to manipulate prices, create liquidity, and execute their positions. As a Smart Money Concept (SMC) trader, understanding how news impacts institutional order flow can help you avoid traps and trade with the institutions, not against them.

This lecture will cover:

1. Why news matters in SMC trading
2. Types of economic news that impact Smart Money flow
3. How Smart Money manipulates price before, during, and after news events
4. Trading strategies for SMC traders around news releases
5. Examples of real market reactions to major news events

1. Why News Matters in SMC Trading

Institutions don’t just react to news—they use it as a tool to manipulate price action. The forex market doesn’t move randomly after a news event; Smart Money ensures liquidity is created before major moves happen.

Key reasons why news is crucial in SMC trading:

• High volatility: News events bring sharp price movements, triggering liquidity grabs.
• Institutional positioning: Banks use news to enter or exit trades without alerting retail traders.
• Stop hunts & liquidity sweeps: Before major news releases, institutions trigger stop losses to accumulate orders at better prices.
• Break of Structure (BOS) & Market Structure Shifts (MSS): News often causes sudden shifts in market structure, which Smart Money uses to confirm directional bias.

Understanding how news affects institutional order flow allows SMC traders to anticipate liquidity grabs and avoid being trapped.

2. Types of Economic News That Impact Smart Money Flow

Not all news events impact the market in the same way. Some news releases create short-term volatility, while others set the direction for days or weeks.

High-Impact News Events:

1. Interest Rate Decisions (FOMC, ECB, BOE, etc.)
   • Central banks like the Federal Reserve (FOMC) control interest rates, which influence institutional investment.
   • Rate hikes increasese) strengthen a currency, while rate cuts (decreases) weaken it.
   • Institutions manipulate prices before these announcements to grab liquidity before the real move.
2. Non-farm payrolls (NFP)
   • Released on the first Friday of every month, NFP data measures U.S. employment changes.
   • Strong job data signals economic growth (bullish for USD), while weak job data signals economic weakness (bearish for USD).
   • NFP often causes liquidity grabs and fake moves before the real trend develops.
3. Consumer Price Index (CPI) & Inflation Reports
   • Inflation drives central bank policies. Higher-than-expected CPI leads to rate hikes, while lower inflation leads to rate cuts.
   • Institutions use CPI releases to manipulate prices before trends are established.
4. Gross Domestic Product (GDP)
   • Measures economic growth. Higher GDP growth is bullish for a currency, while lower GDP growth is bearish.
5. Geopolitical & Unexpected News (War, Political Events, Central Bank Speeches)
   • These create unexpected price shocks, which Smart Money often uses to clear liquidity zones.

3. How Smart Money Manipulates Price Around News Events

Institutions do not trade news in the way retail traders do. Instead, they use news as a mechanism to execute their positions efficiently.

Three Stages of Institutional Price Manipulation During News:

1. Pre-News Liquidity Grab (Before the Event)

• Before major news, Smart Money sweeps liquidity by taking out key highs/lows.
• This tricks retail traders into entering trades in the wrong direction.
• Example: If a bullish news outcome is expected, institutions first push the price down to grab sell-side liquidity before moving higher.

2. Initial News Spike (The Fake Move)

• When the news is released, the price spikes sharply in both directions, hitting stop losses.
• This is not the real move—it’s designed to trap retail traders.
• Many retail traders enter impulsively, only to be stopped minutes later.

3. Post-News Trend Formation (The Real Move Begins)

• Once liquidity has been cleared, institutions push prices in the intended direction.
• This is when SMC traders look for Break of Structure (BOS) and Market Structure Shifts (MSS) to confirm entries.

4. Trading Strategies for SMC Traders Around News Releases

Instead of chasing the news like retail traders, Smart Money traders wait for liquidity to be cleared before entering trades.

1. Avoid Trading Right Before News Releases

• News events cause sudden volatility, so stay out of the market at least 15 minutes before major releases.
• Let Smart Money completeitsr manipulation first.

2. Wait for the Liquidity Grab

• Identify liquidity pools (equal highs/lows, stop clusters) before the news.
• Watch for a sharp price spike that sweeps liquidity—this is the first sign that institutions are positioning.

3. Look for a Break of Structure (BOS) or Market Structure Shift (MSS)

• After the liquidity grab, wait for the price to break structure in the opposite direction.
• This confirms Smart Money is ready to move the price.

4. Enter the Retracement to an Order Block (OB) or Fair Value Gap (FVG)

• Once BOS occurs, wait for the price to retrace into a valid Order Block (OB) or Fair Value Gap (FVG).
• This is where institutions will re-enter their positions.

5. Use Stop-Loss & Target Key Liquidity Areas

• Place stop-losses below the OB (for buys) or above the OB (for sells).
• Target key liquidity zones, such as previous highs/lows or imbalances.

5. Example Trade Setup – NFP News Manipulation

Scenario: USD Strength After NFP Release

1. The Asian and London sessions consolidate, building liquidity above and below the price.
2. Before NFP, Smart Money pushes prices below the Asian session low, grabbing sell-side liquidity.
3. News releases bullish data, causing a quick fake move downward to trap sellers.
4. A Break of Structure (BOS) forms to the upside, confirming institutional buying.
5. The price retraces into a Bullish Order Block (OB), creating a high-probability entry.
6. Price moves up, targeting previous liquidity zones.

6. Summary & Key Takeaways

✅ Institutions use news events to manipulate prices and create liquidity for their positions.
✅ News doesn’t create the move—it accelerates Smart Money’s pre-planned direction.
✅ Before major news, liquidity grabs occur to trap retail traders.
✅ Never trade immediately before a high-impact release—wait for manipulation to complete.
✅ Look for Break of Structure (BOS) and retracements to Order Blocks (OBs) or Fair Value Gaps (FVGs).

By combining SMC with news analysis, traders can avoid unnecessary losses and trade with Smart Money instead of against them.