Perfecting LTF Orderblock Entries With CRT - Candle Range Theory - ICT Concepts

Summary

This video delves into the concept of order blocks in CRT (Candlestick Reversal Trading), explaining their formation, importance, and how to use them for low time frame entries. It emphasizes the need for a logical framework in trading and provides a refined definition of order blocks as candles that purge or fill liquidity. The video illustrates how to identify valid order blocks and offers practical examples to demonstrate their role in generating high-probability trading entries. It also discusses the decision-making process for using the body or wick of a candle as an order block, advocating for a logical approach rather than pattern trading.

Takeaways

• 📊 Order blocks are crucial in trading as they can provide low time frame entries and are identified by their ability to purge or fill liquidity.
• 🔍 The definition of an order block according to the video is a candle or sequence of candles that purges liquidity by taking out a previous higher low or fills liquidity when price closes above or below it.
• 🛑 Two core concepts of order blocks are purging liquidity, which involves taking out highs or lows, and filling liquidity by testing or reacting to previous order blocks.
• 📈 Order blocks can be identified by observing if the price closes above or below the entire candle, including the wick, or just the body of the candle.
• 📝 It's important to use a refined, objective, and logical definition of order blocks to increase the probability of successful trades.
• 🤔 The choice between using the body or the wick of a candle as an order block depends on the price action and how it closes in relation to the candle's open, high, and low.
• 📉 Purging liquidity involves the price moving past a previous low or high, effectively taking out the liquidity at those levels.
• 💧 Filling liquidity is demonstrated when a candle tests or reacts to an existing order block, indicating a key level of support or resistance.
• 📌 Valid order blocks are characterized by either purging or filling liquidity, but not necessarily both.
• 📝 The video emphasizes the importance of pattern trading and using sound logic to increase the effectiveness of trading strategies.
• 🎓 The speaker credits Romeo and Sham for their influence on the understanding and teaching of order blocks within the CRT (Candlestick and Reaction Trading) methodology.

Q & A

What is the main focus of the video script provided?

The video script focuses on explaining the concept of order blocks in the context of CRT (Candlestick Reversal Trading) and how they can be used for trading entries, particularly on lower time frames.

What is an order block according to the refined definition provided in the script?

An order block is defined as a candle or sequence of consecutive candles that purges liquidity in the form of a previous higher low or fills liquidity. It forms when the price closes above or below these candles.

Why is it important to correctly identify an order block in trading?

Correctly identifying an order block is important because it helps traders to find high-probability trading entries and can increase profitability by providing a logical framework for trading decisions.

What are the two core concepts of an order block as per the script?

The two core concepts of an order block are that it must either purge liquidity by taking out above the highs or below the lows, and it must fill liquidity in the form of filling or testing previous order blocks.

How can an order block be identified on a price chart?

An order block can be identified by looking for a candle or sequence of candles that purges or fills liquidity, and then observing if the price closes above or below these candles, which would confirm the order block.

What is a model one entry in the context of the script?

A model one entry refers to a trading entry that occurs when the price retests and reacts off a valid order block, providing a potential entry point for a trade.

Why is it not always necessary for an order block to both purge and fill liquidity to be considered valid?

An order block does not need to perform both functions of purging and filling liquidity to be valid. It only needs to fulfill one of these aspects to be considered a valid key level for trading decisions.

What is the significance of the price closing above or below an order block?

When the price closes above or below an order block, it signifies that the order block has been validated and can be used as a reference key level for future price reactions.

How does the script differentiate between using the body or the wick of a candle for an order block?

The script suggests using the body of the candle as the order block if the price closes just above or below the open of the candle, and using the whole candle including the wick if the price closes beyond the open, high, or low of the candle.

What is the advice given in the script for choosing between using the body or the wick of a candle for an order block?

The advice given is to use proper objective logic and reasoning based on the price action. If the wick is significantly smaller than the body, use the body; if the wick is significantly larger, use the wick as the order block.

How can traders apply the knowledge of order blocks to their trading strategy in lower time frames?

Traders can apply the knowledge of order blocks to identify high-probability entry points in lower time frames, which can lead to more accurate and profitable trades.

Outlines

00:00

📈 Introduction to Order Blocks in Trading

The video script introduces the concept of order blocks in the context of the CRT (Candlestick Reversal Techniques) trading strategy. It emphasizes the importance of order blocks for identifying low time frame entries. The speaker provides a refined definition of an order block, which is a candle or sequence of candles that purges or fills liquidity at a previous high or low. The script clarifies that a valid order block is formed when the price closes above or below these candles, which can then be used as a reference for future price reactions. The video promises to teach viewers how to identify and utilize order blocks effectively, with the aim of increasing trading profitability.

05:00

📉 Core Concepts and Examples of Order Blocks

This paragraph delves into the core concepts of order blocks, explaining why they are significant in trading. It outlines two main aspects: the need for an order block to purge liquidity by moving beyond previous highs or lows, and the importance of the price closing above or below the order block to validate it. The script provides several examples to illustrate how order blocks form and how they can lead to explosive price movements. It also discusses the difference between order blocks that purge liquidity and those that fill it, using examples of both scenarios to demonstrate how traders can identify valid order blocks and use them for entry points in their trades.

10:00

🔍 Deciding Between Body and Wicks of Candles for Order Blocks

The final paragraph addresses the practical question of whether to use the body or the wicks (highs and lows) of candles when identifying order blocks. It presents two scenarios to guide this decision: using the body if the price closes just above or below the open, and using the entire candle, including the wicks, if the price closes beyond both the open and the high or low. The script offers examples for each scenario and suggests that the choice between using the body or the wicks can depend on their relative lengths or the trader's style. The video concludes by encouraging viewers to apply these concepts to lower time frames for more effective trading entries and to share their progress on social media.

Keywords

💡Order Block

An 'Order Block' is a critical concept in trading that refers to a candle or sequence of candles that purges liquidity, either by taking out a previous higher low or filling liquidity. It is a key level that traders use for future reference. In the video, the presenter refines the definition of an order block and explains how it can be used for model one entries in CRT (Candlestick and Pattern Recognition Trading), emphasizing its importance in identifying high-probability trading opportunities.

💡Purging Liquidity

To 'purge liquidity' in trading terms means to eliminate the existing orders at a certain price level, typically by moving the price through that level. In the context of the video, purging liquidity is a core aspect of forming an order block, as it signifies that the market has absorbed the existing orders at a particular price, which can then become a reference point for future price action.

💡Filling Liquidity

'Filling liquidity' is the process of the market testing and validating a price level by interacting with existing orders, often in the form of a price retest. The video explains that filling liquidity is another way an order block can be identified, where the market's interaction with a previous order block or a fair value gap confirms its validity as a key level.

💡Model One Entry

A 'Model One Entry' is a specific type of trading entry strategy discussed in the video, which involves waiting for a retest of an order block before entering a trade. It is considered a high-probability entry point because it is based on the market's previous behavior around the order block, indicating potential future price movement.

💡Candlesticks

Candlesticks are a method of representing price movements over time, used extensively in technical analysis and trading. Each candlestick represents a specific time period and shows the open, high, low, and close prices. In the video, the presenter uses candlestick patterns to identify order blocks and potential trading opportunities.

💡Pattern Trading

Pattern trading is an approach where traders look for recurring patterns in price movements to make trading decisions. The video emphasizes the importance of using a logical framework for pattern trading, particularly when identifying and trading order blocks within the CRT methodology.

💡Key Level

A 'Key Level' in trading is a price point that has significant importance due to its historical behavior, such as being a strong support or resistance level. The video discusses how order blocks can become key levels after they have been validated by the market, serving as reference points for future price reactions.

💡Retest

A 'Retest' in trading occurs when the price returns to a previously significant level after an initial move, testing its strength as support or resistance. The video script mentions retests in the context of order blocks, where a retest can provide a model one entry for traders.

💡Fair Value Gap

A 'Fair Value Gap' is a term used to describe a price level where there is a gap in the market's price action, often due to a news event or significant market movement. In the video, the presenter explains how a candle that fills the liquidity of a fair value gap can become a valid order block.

💡High Probability

In trading, a 'High Probability' setup refers to a situation where the potential for a profitable trade is considered greater than usual based on the analysis of patterns or indicators. The video discusses how correctly identifying order blocks can lead to high probability trading opportunities within the CRT framework.

💡Price Action

Price action is the movement of a financial instrument's price over time, reflecting supply and demand dynamics in the market. The video script discusses price action in the context of order blocks, explaining how the market's interaction with these blocks can indicate future price movements.

Highlights

Introduction to the concept of order blocks and their importance in trading for low time frame entries.

Definition of order blocks based on analysis and refinement over the years, emphasizing a logical framework for trading.

Explanation of the two core concepts of order blocks: purging and filling liquidity.

Identification of order blocks through the engulfing of candles and subsequent price closure above or below them.

The significance of order blocks as future reference key levels for price reactions.

Differentiation between using the candle body or wick as the official order block based on price action.

Practical examples of how price purges liquidity and forms bullish order blocks for trading entries.

Demonstration of how price reacts explosively to retested bearish order blocks.

Illustration of high probability order blocks that both purge and fill liquidity, leading to strong market reactions.

Examples of order blocks that only fill liquidity and their subsequent price reactions.

The decision-making process for choosing between the candle body or wick as the order block based on price closure.

Guidance on using the length of the wick and body to determine the official order block in trading.

Emphasis on using proper, objective logic and reasoning in trading rather than random pattern trading.

Encouragement to manage risk and engage with the trading community for further learning and application.

Invitation for viewers to share their order block entries on social media for feedback and discussion.

Conclusion summarizing the key points of the video and the practical applications of order blocks in CRT trading.

Transcripts

hello everyone and welcome back to

another CRT YouTube video now this

specific episode is on order blocks and

how we can use them to get our low time

frame entries while trading

CRT we will go over how they are formed

why they are so important how to use it

for a model one entry and most

importantly how you can correctly

identify an order block after watching

this episode I am pretty sure that there

will be no questions remaining on order

blocks but if you do have any feel free

to ask them down below post video you

should be able to differentiate the

different forms of order blocks identify

it and integrate it into your CRT

trading model so let's not get into it

let's begin by clearly defining what an

order block is to help you better

understand this concept over the years

ICT has provided various interpretations

but based on his initial explanation

my own 5 plus years of analysis on the

charts and the specific trading

approaches of Romeo and Sham I have

refined my own definition a lot of

people including ICT will say that an

order block is the last D closed candle

or the last up Clos candle before the

downwards move and this is their

definition this is not however what

myself Romeo and Sham use the reason

being being is that what they are doing

is pattern trading and we like to use

Sound Logic we must seek a logical

framework when trading if you use the

general pattern trading order block

technique it will be low probability a

lot of the time and it will not work for

you and you will miss explosive moves

because of this so how do we solve this

problem we must use the most refined

objective and logical definition that we

can find for an order block so I've

gathered all the data from ICT Romeo and

Sham and this is what I've come up with

so an order block is a candle or

sequence of consecutive candles meaning

that it can be a single candle or

multiple that purges liquidity in the

form of a previous higher low or it

fills liquidity so this is it in its

basic form now when these candles get

engulfed and the the price then closes

above or below it an order block forms

meaning that candle or that sequence of

multiple candles turns into an order

block when the price closes below or

above it now this is exactly how you can

define an order block and the most

refined on objective monor be on proper

logic using this definition alone will

change your whole perspective on order

blocks and definitely increase your

profitability

before continuing I do want to once

again shout out Romeo for teaching me

pretty much everything that I know and

also sham for helping me with video

ideas now let's take a look at the Core

Concepts of order blocks so why are

order blocks so significant and why is

it considered a valid key level the main

reasons that order blocks are considered

valid or because when price closes below

or above an order block price will use

it as a fure reference key level to

react off so the first core concept of

an order block is that it has to purge

liquidity this is the main concept for a

key level so an order block must either

take out liquidity by purging above the

highs or below the lows the second core

aspect that an order block has is that

it fills liquidity in the form of

filling or testing fgs or unmitigated

order blocks so this is the best best

way to actually identify an order block

it does not however need to have both of

these aspects to be considered valid it

only needs one of them now we will be

looking at a few examples of high price

actually purchase liquidity and high

order blocks form so right here you can

see that we've got this range low and

beneath this low lies liquidity we know

that above highs and Below lows lies

liquidity now what happens is the price

comes back down and purges this low

meaning it purges liquidity or takes out

liquidity and it does it with a sequence

of consecutive candles this particular

candle right here is the specific one

that purges the liquidity and takes out

the liquidity meaning it takes out the

low but then also the next two candles

will also play a role in purging the

liquidity so price manages to move above

and close above these candles and we are

only regarding this sequence of candles

that breaks and moves below the low as

an order block and you can see what

happens is the price moves above then

closes above these candles with this

particular candle right here and now

these candles are considered a valid

order block the reason for this is they

have followed the two main important

rules for an order block number one it

is taking out and purging below this low

and then our second aspect is that the

price manages to close above it so this

is valid and you would be waiting for a

r test before entering your long trade

on the retest this is your model one

entry let's move on to the next example

so right here you can see that we've got

this Range High and what happened is

that the price purged that high with

this particular candle this action

indicates that liquidity above the high

was taken now once the price closes

below this candle it marks the creation

of a bearish order block you can see

here that the price closes below it then

retests this bearish order block and

reacted to it explosively causing the

price to expand lower again once again

this was would be a valid model one

entry on the retest so right here first

of all you can see that with this candle

we took out a low to the left

effectively purging liquidity by taking

it out so when the price goes below that

low purges it and then closes above it

it becomes a valid bullish order block

that's exactly what happened price

closed above it came back down to test

it which would be our model one entry

again and then reacted off this area now

what you can also see here is that

before we did test this bullish order

block we formed a low which generated

liquidity below it price then moved down

and took out this low with this

particular candle right here this again

aligns with our definition of an order

block you can see that we took out the

range low and purged the liquidity below

it with this candle not only that but

this candle also tested a previous

existing order block meaning it also

grabed liquidity this candle has done

two things it purged liquidity and

filled liquidity by testing a prior area

so now when price closes Above This

level it becomes a high probability high

quality order block you can see how the

market reacted to this order order block

and expanded exlusively above it this is

an example of a high probability order

block which not only purged liquidity

but also filled it now let's move on to

an example of an order block which only

fills liquidity and let's see how it

looks and how it forms here we can see a

fair value Gap what happened is that

this down closed candle filled the

liquidity in the form of Tes this fvg

notice that this candle performed a

crucial function that needs to occur

before an order block is considered

valid it filled the liquidity

effectively testing the level when the

price closed above the candle it became

a valid order block you can see that the

price then moved lower tested the order

block giving our entry and then reacted

and led to a strong upwards movement

Additionally you can observe another

order block of a similar nature here

this candle tested a previously existing

order block filling the unfilled

liquidity of this untested order block

when the price closed above this candle

it also becomes a valid order block and

the price subsequently tested it and

reacted just as expected so these two

examples on the screen right now did not

Purge any liquidity it just filled it

meaning it is a valid order

block now let's move on to our next

slide and discuss whether we will be

using the body or the Wix for an order

block the simple answer is there is no

black and white answer it really does

just depend on the scenar Ario you have

to decide off how price action forms and

reacts to the order block and only then

can you decide whether the wick or body

of the candle is the official order

block so the two different scenarios we

have are the following one if price

closes just above or below the open of

the candle then you would just use the

body as the order block this is because

price only closes above the open and not

not the wick our second scenario would

be the opposite of the first this is

that the price closes below or above

both the open and the wick or the high

of the candle then in this case you

would use the whole candle as an order

block alongside the Wix now let's take a

look at a few examples so here we can

see that this CLE Purge the liquidity

but then the price managed to actually

close above the low but it only managed

to close above the body or the open of

the candle but not the wick so in this

case you will only choose the body off

this candle as your order block this

will then be your model one entry and

price should then react off it now in

this example you can see that the price

purges liquidity by taking out this CRT

low we then see the price close above

the candle that purges the liquidity but

it only closed above the open not the

high so in this case we again use the

candle body as the order block and not

the wick so in this example here that

was shown earlier in the video we only

choose the body of this candle as the

order block and now you know why you

might have been wondering why I didn't

choose the wick and now you know it's

because price only closed above the open

or the body so here is another example

and in this case price did actually

manage to close above the whole candle

including the wick or the high so here

we would actually use the whole candle

as our valid order block now here is our

final example before I explain a little

more we can see here that the price did

actually manage to close above the wick

at the high so the whole candle would

once again be used as our order block so

this is really how easy it is to

differentiate between the two forms of

different order blocks and tell whether

you want to choose the open or body of

the candle or the entire candle

including the wick to so it is the same

as any of our CRT teachings we use

proper objective logic and reasoning

instead of randomly pattern trading it

another efficient way of choosing

whether to use the body or the Wicks is

by looking at the actual length of them

if the wick is significantly smaller

than the body use the body as the order

block this is even including if the

price has closed above or below the wick

if the wick is significantly larger than

the body use the wick as the order block

you can Implement either approach the

earlier one or the one I have just shown

you it really depends on what suits your

trading style the best do not use both

only choose one now when you implement

this on the lower time frame for your

entries with CRT you will be unstoppable

I hope you have enjoyed this video on

low time frame order block entries

within CRT I also hope that you did take

notes as I will be showing you a few

examples for homework for you to tag me

in on Twitter and show me your entries

happy trading guys always remember to

manage your risk and see you next Sunday

for the next CRT video

[Music]