1.
Understand the Basics of Order Blocks
Order blocks are formed during a strong price move (impulse move) and are
typically located at the beginning of the move.
They are areas where institutional traders have placed their orders, creating a
zone of interest for future price action.
Order blocks can be bullish (buying zones) or bearish (selling zones).
2. Identify a Strong Impulse Move
Look for a strong, directional price move (either up or down) with minimal
retracement.
This move indicates that institutional players are actively participating in the
market.
3. Locate the Base of the Impulse Move
The order block is typically found at the base of the impulse move, where the
price initially started its strong move.
For a bullish order block, look for a consolidation or base formation before a
strong upward move.
For a bearish order block, look for a consolidation or base formation before a
strong downward move.
4. Define the Order Block Zone
The order block is represented by the candles that formed the base of the
impulse move.
For a bullish order block, focus on the bullish candles that initiated the
upward move.
For a bearish order block, focus on the bearish candles that initiated the
downward move.
The zone is typically drawn using the high and low of these candles.
5. Mark the Order Block on the Chart
Use a rectangle or box to highlight the order block zone.
For a bullish order block, the zone is often drawn around the last bearish
candles before the price reverses upward.
For a bearish order block, the zone is often drawn around the last bullish
candles before the price reverses downward.
6. Wait for Price to Return to the Order Block
After the impulse move, price often retraces back to the order block zone.
This is where institutional traders may re-enter the market, leading to a
potential reversal or continuation.
7. Confirm with Price Action
Look for rejection or absorption at the order block zone.
For a bullish order block, look for bullish reversal patterns (e.g., engulfing
candles, pin bars) as price approaches the zone.
For a bearish order block, look for bearish reversal patterns as price
approaches the zone.
8. Use Additional Confluences
Combine order blocks with other technical tools like:
o Trendlines
o Fibonacci levels
o Moving averages
o Volume analysis
Confluences increase the probability of the order block being respected.
Example of a Bullish Order Block:
1. Identify a strong upward impulse move.
2. Locate the base of the move (last bearish candles before the upward move).
3. Draw a rectangle around these candles to mark the order block.
4. Wait for price to retrace to this zone and look for bullish reversal signals.
Example of a Bearish Order Block:
1. Identify a strong downward impulse move.
2. Locate the base of the move (last bullish candles before the downward move).
3. Draw a rectangle around these candles to mark the order block.
4. Wait for price to retrace to this zone and look for bearish reversal signals.
Key Tips:
Order blocks are most effective in trending markets.
Avoid using order blocks in choppy or ranging markets.
Always wait for confirmation (price action signals) before entering a trade.
By practicing and applying these steps, you’ll become more proficient at identifying
and trading order blocks on price charts.
**C**: Check for swing points
- **H**: Highlight order blocks
- **A**: Analyze market structure
- **R**: Review liquidity zones
