Order Block

An Order Block (OB) is a candlestick formation that helps identify where a major player is placing their position to buy or sell an asset.

What is an Order Block?

An Order Block is a candlestick formation that shows where a large player places their buy or sell position. Graphically, this tool consists of a candle that takes liquidity. After this candle, an aggressive impulsive candle forms, engulfing the previous one.

The most accurate signal occurs when an imbalance is formed after the engulfed candle. It’s important that during the formation of the Order Block, additional confirmation is received—specifically, a structure break (a change in movement to the opposite direction).

The formation must be located in the zone of interest of a higher time frame. If this condition is not met, it’s likely the price will search for another Order Block with stronger formation conditions.

How to Use OB in Trading?

You can use an Order Block on any time frame! In 90% of cases, we work exclusively from the first test of the OB, and in rare cases, we consider a second entry from the OB, waiting for a reaction on a lower time frame.

Important: The OB should be inside the structural impulse, and it must be traded with the trend.

Trading Algorithm

1. Identify the OB range.
2. On the first touch, enter in the direction of the bounce. For example, if the OB suggests an upward movement, open a position for 1-5 minutes.
3. If the second candle of the OB forms an impulse, it’s an additional confirming factor.

By following these steps, you can effectively incorporate Order Blocks into your trading strategy.