The Best Order Block for Entering Profitable Trades in Smart Money trading technique.

Summary

This Smart Money trading video introduces order blocks, crucial for identifying optimal trade entries in supply and demand zones. It explains the concept, emphasizing that order blocks are single-candle formations, often leading to price reversals or continuations. The video highlights the importance of Break of Structure (BOS) in validating strong order blocks and discusses the distinction between mitigated and unmitigated order blocks, advising traders to use unmitigated areas as profit targets. It concludes with practical trading tips, including setting take-profit levels and recognizing when to avoid trading against broken order blocks.

Takeaways

• 📈 Order blocks are defined as optimized areas of supply and demand, serving as potential entry points in trading.
• 🔍 In a bullish trend, the last bearish or weak bullish candle before an upward movement is considered an order block, and similarly, the last bullish or weak bearish candle in a bearish trend.
• 🌟 Order blocks are typically single-candle formations, distinct from supply and demand zones which may consist of several candles.
• 👀 When a candle's shadow is equal to or larger than its body, the shadow is considered the order block, not the entire candle.
• 💪 Break of Structure (BOS) is crucial for determining the strength of an order block, with a BOS indicating a strong order block.
• ⚖️ Imbalance in the market, resulting from sharp price movements, can lead to revisiting of order block areas as the price attempts to correct.
• 🔄 Order blocks are categorized into mitigated (reached by the price) and unmitigated (not yet reached), with the latter often serving as profit targets.
• 🚫 If the price changes trend upon reaching an unmitigated area, it's advised not to trade against the new trend direction.
• 🎯 Use order blocks as entry points in your trading strategy, especially those that have broken through previous valid higher highs.
• 🛑 Once an order block is broken, it is no longer considered in trades, emphasizing the one-time use nature of order blocks.
• 🔄 Smart Money techniques suggest using order blocks for setting limit orders and aligning take-profit with significant supply or demand zones in higher time frames.

Q & A

What is an order block in the context of trading?

An order block is an optimized area of supply and demand, typically represented by a single-candle formation, which can be considered either a supply or demand zone in trading.

How is an order block identified in a bullish trend?

In a bullish trend, an order block is identified as the last bearish candle before the start of a strong upward movement or the last weak bullish candle before the initiation of a robust upward trend.

What distinguishes an order block from a supply and demand zone?

Order blocks are typically single-candle formations, while supply and demand zones consist of several candles. The focus in trading should be on individual order blocks rather than the entire zone.

What is the significance of the candlestick pattern in an order block?

The significance lies in the candlestick pattern where if the shadow is equal to or larger than the body of the candle, the shadow before the start of the movement is considered the order block.

What does BOS stand for and how does it relate to order blocks?

BOS stands for Break of Structure, which refers to breaking above the previous higher high in a bullish trend or below the previous lower low in a bearish trend. BOSs determine the strength of an order block.

Why is it important to consider the imbalance in trading when dealing with order blocks?

Imbalance indicates a sharp move where there was no opportunity for buying or selling transactions, leading to a price attempt to return to these areas and continue its trend, which is crucial for traders to anticipate price movements.

What are the two types of order blocks and how do they differ?

The two types of order blocks are mitigated and unmitigated. A mitigated order block is an area where the price has reached, while an unmitigated order block is an area the price has not reached yet.

Why are unmitigated areas considered as profit targets in trades?

Unmitigated areas are considered profit targets because the price often breaks mitigated areas and continues its movement until it reaches unmitigated areas, where it may change trend direction.

How should traders set their take-profit when using order blocks?

Traders should set their take-profit before reaching an order block that has formed a BOS, as there is a possibility that the price will quickly reverse to its previous trend after reaching this area.

What happens when an order block is broken in terms of trading strategy?

When an order block is broken, it is no longer considered in trades as it is a one-time use indicator. Traders should look for the next significant supply or demand zone for potential reversals.

Why are order blocks suitable for setting limit orders in Smart Money trading techniques?

Order blocks are suitable for setting limit orders because they provide specific areas where the price is likely to encounter resistance or support, making them ideal for planning entry and exit points in trades.