Order Blocks Explained
Order blocks are areas where institutions placed large orders, and price often returns to these zones.
What is an Order Block?
Definition
- The last candle before a strong move
- Represents institutional order placement
- Acts as supply/demand zone
Why They Work
- Institutions leave unfilled orders
- Price returns to fill remaining orders
- Creates high-probability zones
Bullish Order Block
Identification
- Last bearish candle before bullish impulse
- Strong move up follows
- Creates Break of Structure
Characteristics
- Usually a red/bearish candle
- Located at swing lows
- Followed by displacement
Trading It
- Wait for price to return
- Enter on touch of OB
- Stop below the OB
- Target next liquidity
Bearish Order Block
Identification
- Last bullish candle before bearish impulse
- Strong move down follows
- Creates Break of Structure
Characteristics
- Usually a green/bullish candle
- Located at swing highs
- Followed by displacement
Trading It
- Wait for price to return
- Enter on touch of OB
- Stop above the OB
- Target next liquidity
Order Block Refinement
Basic OB
- Entire candle body
- Wider zone
- More conservative
Refined OB
- 50% of the candle
- Tighter entry
- Better risk-reward
Extreme OB
- Just the wick
- Most aggressive
- Highest reward potential
Valid vs Invalid Order Blocks
Valid OB Criteria
- Creates Break of Structure
- Has displacement (strong move)
- Leaves imbalance/FVG
- Unmitigated (not tested yet)
Invalid OB Signs
- No structure break
- Weak move after
- Already mitigated
- Inside ranging market
Mitigation
What is Mitigation?
- When price returns to an OB
- Fills remaining orders
- OB becomes invalid after
One-Touch Rule
- Most OBs only work once
- After mitigation, find new OB
- Exception: extreme OB wicks
Timeframe Considerations
HTF Order Blocks
- Daily/Weekly
- Major zones
- Stronger reactions
LTF Order Blocks
- H1/M15
- Entry refinement
- Within HTF zones
Practical Tips
- Only trade OBs with structure break
- Look for confluence with liquidity
- Higher timeframe OBs are stronger
- Don't chase - wait for price to come to you
- Always have a clear invalidation point