What is an Order Block?
A bullish order block is the last bearish (red) candle before price surges strongly upward. A bearish order block is the last bullish (green) candle before price drops sharply. These zones represent where institutional accumulation or distribution began.
When price returns to an order block, unfilled institutional orders are still waiting. This creates a high-probability reaction zone where smart money re-enters to continue pushing price in the original direction.
How to Identify Valid Order Blocks
Not every candle before a move is a valid order block. The strongest order blocks are those that caused a Break of Structure (BOS) or Change of Character (CHoCH) — confirming institutional intent behind the move.
Look for order blocks on higher timeframes (Daily, 4H, 1H) to identify the most significant zones. Lower timeframe order blocks within these higher timeframe zones become the most precise entries.
Trading Order Blocks
Wait for price to return to the order block and show rejection before entering. Confirmation signals include a strong rejection candle, a lower timeframe CHoCH inside the zone, or a Fair Value Gap forming within the order block range.
Place your stop-loss just beyond the opposite end of the order block. Target the next liquidity level — the previous high or low that has not been swept yet. A minimum 1:2 risk-to-reward is standard.