This Order Block Strategy Changed My Trading (Full Guide)

Summary

In this video, the creator shares a simple trading technique that significantly improved their win rate and profitability by using order blocks. The video explains how order blocks—zones of high liquidity where banks and institutions enter trades—can help traders identify the best entry points. The process involves combining order blocks with strategies like break and retest for higher-probability trades. Detailed steps are provided for drawing both bullish and bearish order blocks, with real trading examples to illustrate their application. By the end, viewers will understand how to incorporate order blocks into their own trading strategies for better results.

Takeaways

• 😀 Order blocks are essential tools for identifying the best entry points on charts, increasing win rates and trade profitability.
• 😀 An order block represents areas on the chart where the most liquidity exists, which is typically where large institutions and banks enter trades.
• 😀 There are two types of order blocks: bullish (for uptrends) and bearish (for downtrends). Understanding both is crucial for trading.
• 😀 To draw a bullish order block, identify the last down-close candle before the price moves upwards, and look for a retest of this level for potential entry.
• 😀 To draw a bearish order block, identify the last up-close candle before the price moves downward, and look for a retest to enter short positions.
• 😀 Combining order blocks with other strategies, such as the 5-minute opening range strategy, enhances the accuracy of trade entries by providing multiple confluences.
• 😀 Risk management is crucial when trading with order blocks. A 2R (risk-to-reward ratio) is recommended for more reliable trade outcomes.
• 😀 When drawing order blocks, the wick of the candle often provides a stronger confirmation than using the full candle body, especially for more precise entries.
• 😀 It's important to treat order block zones as areas, not exact levels. The price can slightly dip into an order block before reversing, which doesn't invalidate the trade.
• 😀 Traders should pay attention to market structure and price action when using order blocks. These provide confirmation and can help manage trades even if the price temporarily dips below a drawn order block.

Q & A

What is the main trick introduced in the video that helped improve trading performance?

The main trick introduced in the video is using order blocks to identify the best entry points on the charts, which helped increase the win rate and made trades more profitable by simplifying the trading process.

How does understanding order blocks help traders increase their win rate?

Order blocks help traders identify where the most liquidity is on a chart, allowing them to enter trades in areas where institutions and banks are likely to be entering, thereby increasing the probability of successful trades.

What is the key difference between bullish and bearish order blocks?

Bullish order blocks are identified in an uptrend, marked by the last down close candle before a price move up, while bearish order blocks are identified in a downtrend, marked by the last up close candle before a price move down.

How do you draw a bullish order block?

To draw a bullish order block, you first identify a bullish trend, mark the last down close candle before the price moved up, and then wait for the price to break above the previous high, followed by a retest of the order block.

What should traders look for when drawing a bearish order block?

When drawing a bearish order block, traders should first identify a bearish trend, mark the last up close candle in the downtrend, and then wait for the price to break below the previous low, followed by a retest into the order block.

Should traders draw order blocks using the wick or the full body of the candle?

Traders can draw order blocks using either the wick or the full body of the candle. The wick tends to provide the most powerful order blocks, offering more precise entries, while using the full body might lead to a less defined entry zone.

What is the significance of combining order blocks with other strategies like the 5-minute opening range strategy?

Combining order blocks with other strategies, like the 5-minute opening range, enhances trade confirmation by aligning multiple confluences. This increases the likelihood of a successful entry and improves overall win rate.

How can risk management be integrated into trading with order blocks?

Risk management can be integrated by ensuring the trade has a minimum 2:1 risk-to-reward ratio, meaning for every $100 risked, the trader should aim to make at least $200. Stop losses can be placed at key levels, such as the break of the order block.

What should traders do when a stock breaks below an order block but does not invalidate the trade?

When a stock breaks below an order block, traders should not immediately invalidate the trade. It's important to understand market structure and price action, as this could be a temporary pullback, and the trade may still be valid if the price holds above key levels.

What is the role of weak or strong price action in determining the success of a trade with order blocks?

Weak or strong price action helps confirm whether the trade setup is valid. A strong price action candle indicates confidence in the direction, while weak price action may suggest indecision, requiring traders to wait for clearer signals before entering a trade.