Order Blocks Explained: 3 Best Strategies Revealed

Summary

The video is an ultimate guide to mastering order blocks in trading, covering both basic and advanced techniques. It explains the concept of order blocks, their differences from support and resistance levels, and the rules for identifying valid order blocks. The video also introduces three high-probability trading strategies using order blocks: multi-timeframe confirmation, inducement traps, and breaker blocks. It emphasizes the importance of understanding market structure changes and using these strategies effectively for consistent profits. The guide serves as a comprehensive resource for traders at all levels, aiming to leverage order blocks for successful trading.

Takeaways

• 📊 Order blocks are areas on the chart where large institutions, known as smart money, enter the market, causing significant price movements.
• 🔵 Bullish order blocks (buy orders) and 🟣 bearish order blocks (sell orders) are identified based on price action and inefficiencies, with different colors used for clarity.
• 🚫 Order blocks differ from support and resistance: they're thicker zones and typically valid for one retest, while support and resistance can be used multiple times.
• 📉 A valid order block must create an inefficiency or gap between candlesticks, indicating imbalance in the market.
• ⛔ Once an order block is touched or tested, it is no longer valid for future trades, unless using specific strategies.
• 📐 To confirm a valid order block, it must lead to a break of structure (BOS) or a change of character (CHOCH) in the market trend.
• 🔍 Strategy 1 involves multi-timeframe confirmation, starting from a higher timeframe to find valid order blocks and using a lower timeframe to confirm reversals with patterns like bearish engulfing.
• 🎯 Strategy 2 uses inducement traps, where minor key levels above major order blocks often induce traders to enter prematurely, leading to a retest of the major order block.
• 📉 Strategy 3 focuses on breaker blocks, where previously valid but broken order blocks act as potential resistance levels for new short positions.
• 🛠 SimpleFX is promoted as a versatile trading platform, offering a $40 bonus with a minimum deposit, along with integrated tools like TradingView for streamlined trading.

Q & A

What is the main topic of the video?

The video provides an Ultimate Guide to mastering order blocks in trading, including both basics and advanced techniques.

What are the two types of order blocks?

The two types of order blocks are bullish order blocks, which are caused by large buy orders, and bearish order blocks, which are caused by large sell orders.

How do order blocks differ from support and resistance levels?

Order blocks are formed based on significant price movement, while support and resistance levels require prior rejections to form. Additionally, order blocks are usually drawn as thick zones, whereas support and resistance levels are drawn as thin zones or lines.

What are the three rules for identifying a valid order block?

The three rules are: 1) It must create a gap or inefficiency. 2) It must remain unmitigated or untested. 3) It must lead to a break of structure or a change of character.

What is the significance of inefficiency in identifying order blocks?

Inefficiency, also called imbalance, refers to a gap between candles that indicates a potential order block. It helps traders distinguish between valid and invalid order blocks.

What does the term 'change of character' mean in trading?

A 'change of character' occurs when the market structure shifts from an uptrend to a downtrend, or vice versa, marked by the price breaking previous highs or lows.

What is the multi-timeframe confirmation strategy?

In the multi-timeframe confirmation strategy, traders identify an order block on a higher timeframe and wait for confirmation of a price reversal on a lower timeframe, such as through a bearish engulfing candlestick pattern.

What is an inducement trap in trading?

An inducement trap involves a minor key level forming near a major order block, where traders expect a bounce at the minor key level, but the price breaks this level and retraces to the major order block before reversing.

What is a breaker block?

A breaker block is a previously valid order block that has been broken. It can act as a potential resistance level where the price may reject after retesting the broken order block.

What is the role of large institutions, often referred to as 'smart money,' in the formation of order blocks?

Large institutions or 'smart money' often trade with significant capital, causing noticeable price movements that form order blocks when they enter or exit positions.