How To Identify and Trade with Rejection Blocks ICT Concept

Summary

In this video, the concept of rejection blocks is explained, emphasizing their role in price action analysis within the ICT framework. A rejection block occurs when price gets strongly rejected at specific levels, typically formed around highs and lows. These blocks are identified by a three-candle price action pattern, where the middle candle has the highest wick. Though they resemble order blocks, rejection blocks are distinct and not always easy to spot. The video also offers insights into how to recognize rejection blocks on charts across various financial markets, with a focus on Forex, crypto, and stocks.

Takeaways

• 😀 A rejection block is an area on the chart where price is strongly rejected, often around highs and lows.
• 😀 Rejection blocks are similar to other institutional blocks but are not the same.
• 😀 They are identified using a three-candle price action formation.
• 😀 The middle candle in the three-candle formation must have the highest wick compared to the first and third candles.
• 😀 The bodies of the three candles should be roughly equal to qualify as a rejection block.
• 😀 Price often trades through the bodies of the candles but gets rejected at the level of the middle candle's wick.
• 😀 If the middle candle does not have the highest wick, the formation is not considered a rejection block, even if price reacts nearby.
• 😀 Rejection blocks can be observed across multiple markets including Forex, crypto, and stocks.
• 😀 Traders often confuse rejection blocks with other blocks, so proper identification is essential.
• 😀 Rejection blocks may coincide with Fair Value Gaps and can provide trading opportunities, although the video author primarily uses them for analysis rather than trading.
• 😀 Recognizing rejection blocks helps anticipate possible price reactions around key liquidity zones.

Q & A

What is a rejection block in trading?

A rejection block is a price area where price gets strongly rejected after approaching a specific level. It typically forms around highs and lows, often where liquidity is taken out before price reverses.

How does a rejection block differ from an order block?

A rejection block is similar to an order block in that it represents a key level in price action, but they differ in formation. Rejection blocks are characterized by a three-candle pattern with the middle candle having the highest wick, while order blocks may not always exhibit this pattern.

What is the significance of the middle candle in a rejection block?

In a rejection block, the middle candle must have the highest wick among the three candles. This wick indicates where price was rejected after reaching a certain level, which is essential for identifying the rejection block.

Can rejection blocks form at any price level?

No, rejection blocks typically form at key price levels such as highs and lows, where liquidity is being taken out, which causes a strong reaction in price.

What pattern should you look for to identify a rejection block?

Look for a three-candle pattern where the bodies of the candles are nearly equal, and the middle candle has the highest wick. This pattern signifies a strong rejection at that level.

Are rejection blocks easy to spot on a chart?

No, rejection blocks are not always easy to spot as they resemble order blocks. However, once familiar with the pattern, they can be identified as areas where price was rejected after reaching a specific point.

Why do some traders confuse rejection blocks with order blocks?

Rejection blocks look similar to order blocks because both involve key price levels. The confusion arises because both patterns represent strong price movements, but rejection blocks are specifically identified by the three-candle pattern with the middle candle having the highest wick.

What time frames can rejection blocks be observed on?

Rejection blocks can be observed on various time frames, from higher time frames like 15 minutes to lower time frames like 5 minutes, depending on the trader’s strategy.

What should a trader do once they identify a rejection block on their chart?

Once a trader identifies a rejection block, they should be cautious as price may react strongly in that area. Traders can use rejection blocks to anticipate potential reversals or price reactions, especially if they occur at significant highs or lows.

How can rejection blocks be used in trading strategies?

Rejection blocks can be used in trading strategies by identifying areas where price might reverse or get rejected. Traders can enter trades when price approaches these levels, expecting a rejection or price movement in the opposite direction.