Order Block trading strategy for orders with examples
I’ll talk about the order block trading strategy with examples in this article. A trading strategy known as the order block trading strategy includes locating and trading off important price levels on a price chart. Traders who employ this strategy search for regions where there has been a lot of buying or selling in the past, as these regions may later serve as locations of support or resistance.
Order blocks can be found in any market, including stocks, futures, currency, and cryptocurrencies, and can be employed in any timeframe, from minutes to weeks. To confirm trades or spot possible trades, order block trading can be used in conjunction with other technical analysis tools including trend lines, moving averages, and oscillators.
Here are the general steps involved in using the order block trading method:
Find a price chart that clearly displays areas of buying or selling activity, usually represented by a series of candles.
Find the most important “order blocks”—that is, concentrated areas of purchasing or selling activity.
Find out if the price is likely to abide by or beyond the order block. You can do this by observing the nearby price movement.
Consider opening a long or short trade near the block with a stop loss order set immediately below or above the block, depending on whether the price is likely to respect the block.
Order Block Trading Strategy with Examples will be update soon below
This concept divides into 3 parts
- SMART MONEY CONCEPT
Supply and demand
order block - SMART MONEY MARKET STRUCTURE
SD FLIP
CHoCH
BOS - SMART MONEY ENTRY TECHNIQUE
Liquidity hunting
Inducement
For Example IGL gas stock below where you will see Demand Zone below with order block at 340 ish to 360 range and price on retest went to 440 on Daily timeframe min which is more than 23% where there is a Supply zone previously where sellers entered so we exit there.
Order Block Trading Strategy System
What is Order Block in Trading?
Order Blocks are the traces the market makes after an abrupt action. The Order Block (OB) is the final opposing candle before a significant move that upsets the market’s equilibrium. Before it prompts another impulse move to maintain his trend, Price is most likely to return to those zones.
Order Block Trading Strategy for Orders
What Makes Order Block Zone in Our Chart?
The bearish order block zone was formed in opposition to the bullish order block zone, which is evidence that smart money was placing sell transactions at the time. Aggressive people seek to buy or sell as soon as possible. In other words, you place a MARKET ORDER to buy or sell something at the best price possible right now.
Your order will not be filled all at once because it is so large. The position will be split as the price rises quickly, but it will fill quickly and you will be able to enter the entire position. The price is aggressively driven up or down by aggressive market participants using their market orders.
So, the order block zone can only be seen once the price speeds away from the zone. It indicates that there was smart money buying or selling interest at the origin of that move
Why Does the Market Return to Untested Order Block Zones?
The smart money position is fairly substantial, therefore it won’t be filled completely at once. The smart money was unable to complete all of its trades when the order block zone was established. They can immediately enter the market and change the price along with them. They will be compelled to buy more and sell less if they do this. They resolve this issue by continuing order blocks on the books. The purpose of leaving pending orders at order block zones is to allow the market to go back in the direction that the order block zone was originally created, allowing the smart money to finish the trades they were initially unable to complete.
Criteria For Valid Order Block Zone Trading
A valid demand/supply zone is a zone, where prices rapidly move away with wide candle(imbalance) and beaks of structure or changes of character. So, three important factors to study to find a valid zone
- Liquidity hunting at order block zone. IN THE FORM OF Stop Hunt Candle / Fake out/candle trap OR PSY
- Imbalances move or sharp move in a short time SRC/AR CANDLE MUST (MOVE AFTRE ORDERBLOCK).
- beaks of structure/ changes of character choch and then untested order block zone FOR entry again.
Imbalance move after order block zone
An imbalance refers to a situation where there is a significant difference between the number of buy orders and sale orders for a particular security or asset. This can occur when there is a large amount of buying or selling pressure in the market, which can cause the price of the security to move rapidly in one direction
Momentum should increase. suggest an imbalance in price
Order block zone should not test the next 3 candles and also in a bullish order block previous candle low should not breach in the next 3 candle.
For example HDFC stock below near 2850 zone where there is a order block supply zone which caused the continous LH and LL formations. Now upon retest it has potential to go to 2100 which is around 26% on Daily timeframe which was hit on retest in just matter of days.
Volume in Order Block Zone Trading Strategy
A higher volume at a particular level could indicate that it is a stronger level of support or resistance.
Either high-volume block candle and follow-through Or follow-through volume increasing after block candle formed.
Order Block move should Break the Market Structure BOS.
BEFORE going forward lest understand valid breakout vs invalid breakout
SMART MONEY MARKET STRUCTURE includes
- SD FLIP (Supply demand flip)
- CHoCH ( Change of character)
- BOS (Break of structure)
SMART MONEY ENTRY TECHNIQUE includes
- Liquidity hunting
- Inducement