Best Order Block Trading Strategy (Advanced)

Summary

This video introduces an advanced smart money trading strategy called 'Order Block,' which involves identifying significant market moves and entering trades in the same direction as financial professionals. It covers key concepts like order blocks, break of structure, and change of character, and demonstrates a two-step strategy: analyzing market structure in higher time frames and waiting for a change of character in lower time frames to find entry points. The video emphasizes the importance of risk management and backtesting for successful trading.

Takeaways

• 📈 The smart money trading system is designed to follow the market movements initiated by financial professionals.
• 🔍 The 'Order Block' strategy is an advanced trading technique that identifies significant market movements and potential entry points.
• 📚 Understanding concepts like 'Order Block', 'Break of Structure', and 'Change of Character' is crucial for applying this strategy effectively.
• 📊 Order Blocks are identified as zones of optimized demand and supply that form during large capital market entries, often resulting in significant price movements.
• 📉 In a bullish scenario, the last bearish candle before a heavy bullish move is considered the Order Block Zone.
• 📈 'Break of Structure' occurs when the market breaks the most recent higher high, indicating a continued upward trend.
• 📉 'Change of Character' is identified when the market breaks the recent higher low to the downside, signaling a potential change in market direction.
• 🔑 The strategy involves two main steps: analyzing the market structure and order blocks in a higher time frame, then looking for 'Change of Character' in a lower time frame for entry points.
• ⏱ The entry time frame for trades should be at least twice as low as the analysis time frame to ensure proper strategy application.
• 🎯 Risk management is essential; traders should risk half the amount for subsequent trades after the initial 'Change of Character' entry.
• 📝 It's recommended to backtest the strategy and gain confidence before live trading, and to never have more than three open trades for the same analysis on a currency pair.

Q & A

What is the smart money trading system based on?

The smart money trading system is based on finding the footsteps of smart capital placed in the market by financial professionals and entering the market in the same direction.

What is the 'Order Block' trading strategy?

The 'Order Block' trading strategy is an advanced smart money trading method that involves identifying large capital movements in the market, which create demand and supply zones known as order blocks, and trading in the same direction as these movements.

What are the key smart money concepts mentioned in the script?

The key smart money concepts mentioned are order blocks, break of structure, and change of character.

How are order blocks identified in a bullish scenario?

In a bullish scenario, the last bearish candlestick before the start of a heavy bullish move is identified as the order block zone.

What does a 'break of structure' indicate in a trending market?

A 'break of structure' in a trending market indicates that the market intends to continue in the same direction, especially when the latest higher high is broken to the upside.

What is meant by 'change of character' in the context of trading?

'Change of character' refers to a situation where the market breaks the recent higher low to the downside, signaling an intention to change its direction.

What are the two steps involved in the smart money trading strategy discussed in the script?

The two steps are: 1) Analyzing the market structure and identifying order blocks in a higher time frame, and 2) Zooming into a lower time frame to wait for a change of character and look for order block entries.

Why is it important to have an entry time frame that is at least two times lower than the analysis time frame?

Having an entry time frame at least two times lower than the analysis time frame allows for a more detailed view of potential entry points and helps in identifying precise moments for trading based on the order block strategy.

How should a trader manage risk when using the order block strategy for multiple trades on the same currency pair?

A trader should risk half the size for the second and third trades compared to the first trade, and should not have more than three trades open for the same analysis on a pair to manage risk effectively.

What is the significance of using Fibonacci retracement levels in certain trading scenarios as mentioned in the script?

Fibonacci retracement levels are used when there are no clear order blocks identified in the desired time frame, allowing traders to place trades with a stop loss wider than usual, as they are entering the market earlier than the market's confirmed direction.

Why is it recommended to backtest the smart money strategy before live trading?

Backtesting the smart money strategy helps traders gain confidence in the strategy, understand its performance on different currency pairs, and ensures that they have a proper risk management plan in place before live trading.