Mitigation block

The name describes what is thought to happen at the zone. Traders who bought at the swing low are in a loss once price breaks below it. When price comes back, they can close near their entry – mitigate the loss. Their selling, added to new shorts, is the reason the zone is expected to act as resistance.

In structure terms a mitigation block is an order block that failed. The swing low was a bullish zone that launched a rally. The rally did not reach the previous high, price closed through the zone, and its role changed.

• Bearish mitigation block – a high, a pullback low, a lower high, then a close below the pullback low. The zone at that low is read as resistance.
• Bullish mitigation block – a low, a bounce high, a higher low, then a close above the bounce high. The zone at that high is read as support.
• The zone is usually drawn over the last opposite candle of the swing: the last down candle before the failed rally in the bearish case, the last up candle before the failed drop in the bullish case. Some traders mark the whole cluster of candles at the swing.

Both are failed order blocks, and both are traded on the return. The difference is what price did before the break.

With a breaker block the last rally makes a higher high first. It takes the stops above the previous high – a liquidity sweep – and only then breaks the swing low. With a mitigation block the rally stops short: a lower high, no sweep. Many traders rate the breaker higher because of that sweep. The mitigation block shows weakness earlier – the trend could not even reach its old high.

An order block is the last opposite candle before a move that breaks structure, and it is traded in the direction of that move: a bullish block is support. A mitigation block is a block that price has closed through, traded in the opposite role: a former bullish block becomes resistance.

The word mitigation is also used in a wider sense. Price is said to mitigate an order block or a fair value gap when it returns to the zone and trades into it. That is a description of a retest, not a separate pattern.

On Charts the Order Blocks and Breakers indicator in the Smart Money group marks order blocks and the breakers they turn into. Smart Money indicators are included in Plus and Premium. A mitigation block can be marked by hand with the rectangle tool.

• Find a trend that has stalled: in an uptrend, a rally that ends below the previous high.
• Mark the swing low between the two highs.
• Wait for a candle to close below that low – a break against the uptrend, the same event as a change of character.
• Draw a rectangle over the last down candle at the swing low and extend it to the right.

The first return gets the most attention. A zone that price has already traded deep into is treated as used.

• Direction – with the break: shorts from a bearish block, longs from a bullish one.
• Entry – when price returns to the zone. Common choices are the near edge, the midpoint, or a break of structure on a lower timeframe inside the zone.
• Stop – beyond the far edge of the block. A wider and safer version is beyond the lower high for shorts or the higher low for longs.
• Target – the low made by the break, then the next swing low beyond it. For longs, the mirror levels.

• Marking the block before the break – until a candle closes beyond the swing, the lower high is only a pullback in an uptrend.
• Mixing it up with a breaker – check whether the previous high or low was taken. The label changes how much weight traders give the zone.
• Ignoring the higher timeframe – a bearish block inside a strong daily uptrend is often run through.
• A stop inside the zone – price often trades through most of the block before it turns.