BEST Order Block Day Trading Course Using Smart Money Concepts

Summary

This video provides an in-depth guide on how to identify and trade using order blocks, engulfing candles, and pin bars. It highlights the importance of switching between different time frames to reduce risk and increase reward. Engulfing candles signal strong market shifts, while pin bars indicate rejection at key levels. By entering trades on lower time frames and using these price action signals, traders can reduce risk and maximize potential gains. The video emphasizes strategic decision-making and risk management for more effective trading.

Takeaways

• 😀 Focus on higher time frames (H1, H4, Daily) to identify strong order block zones, and switch to lower time frames (M5, M15) for precise entries.
• 😀 Price action patterns like engulfing candles and pin bars are key to confirming trade setups within order blocks.
• 😀 Engulfing candles signal the market's potential direction when they form within an order block zone.
• 😀 A large bearish engulfing candle following a small bullish one can pressure long traders to close their positions, which often causes price movement away from the order block.
• 😀 Reducing time frames after identifying an order block on a higher time frame can help minimize risk and potentially increase reward by entering trades earlier.
• 😀 Entering trades based on engulfing candles on lower time frames allows for smaller stop-loss distances, reducing overall risk exposure.
• 😀 A 50% reduction in risk is possible by switching to a lower time frame to execute trades, significantly improving risk management over a series of trades.
• 😀 Pin bars act as strong rejection signals, particularly when formed near support/resistance levels or swing highs/lows within an order block.
• 😀 Waiting for pin bars to close before placing a trade can help confirm the market's rejection, leading to more reliable entries.
• 😀 By switching to even lower time frames to identify additional pin bars within the same order block, traders can further confirm the strength of the setup and refine their entries.

Q & A

What is the key concept behind trading with order blocks?

The key concept behind trading with order blocks is identifying specific points in the market where price experiences substantial upward or downward movement. These movements are often caused by large institutional traders, known as smart money, who leave pending orders in the order block zone to fill their positions when the market retraces.

What is a bullish order block, and how does it indicate buying pressure?

A bullish order block refers to the last downward candle or series of candles before a strong upward impulse in price. It serves as a support level and represents the presence of buy orders from institutional traders, indicating buying pressure in that price zone.

What defines a bearish order block, and how does it act as resistance?

A bearish order block is the last up candle or series of up candles before a downward impulse in price. It acts as resistance because it represents sell orders from institutional traders, indicating selling pressure at that price level.

Why is liquidity important when trading with order blocks?

Liquidity is important because it allows for large trades to be executed without causing significant price disruptions. Large institutions rely on finding areas with sufficient liquidity to enter or exit positions without affecting market prices too drastically.

What is the misconception about older versus recently created order blocks?

The misconception is that older order blocks are more reliable because they have had time to accumulate liquidity. However, recent order blocks are more profitable because institutions act quickly when the market retraces to these zones, and older blocks are less effective due to a lack of new interest from smart money.

How do liquidity runs and breaks in market structure affect the strength of an order block?

The strength of an order block is enhanced by a liquidity run and a break in market structure (change of character). A liquidity run triggers stop losses, while a break in market structure signifies that smart money has entered the market, creating a higher probability of success when price revisits the order block.

What role does an engulfing candle play in confirming an entry at an order block?

An engulfing candle shows that a large price move has occurred, which often indicates that smart money has entered the market. When found near an order block, the engulfing candle can serve as a trigger for entering a trade, signaling that a reversal or continuation is likely.

Why is it recommended to avoid using very low timeframes, such as the 1-minute chart, when trading order blocks?

Very low timeframes, such as the 1-minute chart, often generate many false signals, making it harder to accurately identify trends and entry points. Trading on higher timeframes, like the 5-minute chart, helps reduce noise and improve the reliability of the signals.

What is the advantage of switching to lower timeframes when entering trades based on order blocks?

Switching to lower timeframes can reduce risk and increase potential rewards. By entering trades on lower timeframes, traders can place tighter stop-loss levels, decreasing the overall risk while still capturing profitable moves.

How does the behavior of breakout traders impact market movements near order blocks?

Breakout traders often place orders in anticipation of a breakout. When the market fails to continue in the breakout direction and starts moving in the opposite direction, these traders are trapped in losing positions. As they close their trades, it creates buying or selling pressure, which can drive the market toward the order block zone, providing an opportunity for smart money to fill their remaining positions.