Order block

An order block is a single candle, or a tight group of candles, at the start of a strong one-sided move. In the bullish case it is the last candle that closed down before price rallied and broke a previous swing high.

The term comes from ICT (Inner Circle Trader) and smart money concepts. The idea behind it: a large participant cannot fill a big position at one price, so the position is built inside a narrow range. When price returns to that range, traders expect the remaining orders to defend it.

• Bullish order block – the last down candle before a strong move up. The zone is read as support, and traders look for longs when price returns to it.
• Bearish order block – the last up candle before a strong move down. The zone is read as resistance, and traders look for shorts on the return.
• The zone is usually drawn from the high to the low of the candle. A stricter version uses only the body, from open to close.

On Charts the Order Blocks and Breakers indicator in the Smart Money group marks these zones. Smart Money indicators are included in Plus and Premium.

• Find a move that breaks structure – a close above a previous swing high or below a previous swing low. Without a break of structure the candle is just a candle.
• Go back to the start of that move and take the last candle of the opposite color.
• Check the move itself: large candles, small wicks against it, often a fair value gap right after the block.
• Draw a rectangle over the candle and extend it to the right until price comes back.

The first return to a block gets the most attention. Each further test is treated as weaker, because the orders that were waiting there have already been used.

• Direction – with the move that created the block: longs from a bullish block, shorts from a bearish one.
• Entry – when price returns to the zone. Common choices are the near edge, the midpoint of the candle, or a small break of structure on a lower timeframe inside the zone.
• Stop – beyond the far side of the block. For a bullish block that is below the low of the candle.
• Target – the high or low made by the move away from the block, then the next liquidity beyond it, for example equal highs.

A breaker block is an order block that failed. Price closes through a bullish order block instead of bouncing from it, and the same zone is then read as resistance. A bearish block that price closes above is read as support.

Breakers often appear after a liquidity sweep: price takes a high or a low, reverses, and breaks the block that was holding the old direction.

An order block is a candle: the last opposite candle before the move. A fair value gap is empty space: the range inside the move that only one candle traded through. The two usually appear together, with the gap right after the block.

Traders often use the gap as the first area to enter from and the block as the deeper one. A return that fills the gap and reaches the block is treated as a stronger area than either one alone.

• Marking every opposite candle – a block counts only when the move from it breaks structure.
• Trading against the higher timeframe – a bullish block on the 5-minute chart inside a daily downtrend often fails.
• Trading a block that was already tested – the zone is weaker after price has traded deep into it.
• Placing the stop inside the zone – a wick through most of the block is normal.