Order Block Trading Strategies

Order Block Trading
A strategy that is not as common with retail traders is order block trading.
You can use many order block strategies to attempt to target significant areas to
enter the market and manage your trades.
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This post breaks down order block trading and how to use it in your trading.
What is Order Block Trading?
Order block trading is analyzing where large blocks of orders form in the market
and using this information to buy or sell.
Big trading institutions and banks usually create these blocks.
Knowing where these big players are putting their order blocks can help you
identify the best areas to enter new trades or exit existing ones.
While there is no one central exchange for foreign exchange markets, the big banks
and institutions significantly aﬀect where prices move.
Where these whales of the markets are placing their order blocks can have a
significant eﬀect on what prices do.
If you know and understand where these order blocks are building up, you can use
it to your advantage when making trades.
The key to order block trading is recognizing these critical levels in the market.
When prices move into an order block area, we can o en see large movements in
price and a spike in liquidity. This can lead to very profitable trades.
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Order Block Theory
Because central banks and large institutions play a huge role in price movement, it
is essential to understand where they are putting their order blocks.
There are several reasons these whales are placing the orders the way they are, but
it is o en to enter or exit huge positions without spooking the market.
If a large bank is trying to enter the market at the best possible price, they will use
order blocks instead of one ginormous order.
This way price will not explode, and they will get in at the best possible price.
An example is 'Bank XYZ' has a huge trade they need to fill.
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If they make this trade in one colossal order, they will risk there will not be enough
liquidity to enter it all, and also risk price spiking as they start to enter and don't get
the best price.
Instead, they will enter multiple positions known as order blocks. They will place
these order blocks at strategic areas where they are sure to be filled and will get the
best possible price.
Another way to think about this is how a large institution would break their order
up. If they are trying to enter a particular market with a $500 million trade, but only
$100 million are being sold, they face two things.
The first is that they will be entered into that first $100 million. However, there will
still be $400 million le not entered. This could see the price spike, and as the
banks try to buy the remaining $400 million, they will be entering at worse and
worse price levels.
Order Block Smart Money Concepts
Smart money concepts are built around what the big players are doing in the
market.
One way traders will o en use smart money concepts is by looking for when the big
players are placing their order blocks and stop hunting.
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The easiest way to identify these supply and demand smart money stop-outs is to
look at your price action and market structure.
In the example below, we go through how these order blocks build up and how a
stop hunt occurs around the market structure.
How to Trade With Order Blocks
Order block and smart money trading can be used hand in hand with your other
technical analysis and price action trading.
You can also use other helpful indicators that can help you refine trade entries and
where to place your take profit and stop loss.
The example below shows how a stop hunt occurs, and you can use this
information to make high-probability reversal trades.
The first part of this stop hunt is the clear resistance level that is in place. Each time
price has tested this resistance, the big players have stepped in and pushed the
price back lower.
The key to this setup is that a large number of stop losses would sit above this
resistance. Many traders who have sold when the price has hit the resistance would
have their stops just above.
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The big players know this.
When the price moves into the resistance again, it breaks through. This would
activate many of these stop-loss orders and close many trades.
This is a false move, and stop out. As soon as the price has popped above this level
and hit a lot of stops, it quickly reverses and moves back lower.
Order Block Indicator
While one of the best ways to identify order block levels is using your price action
and technical analysis, some indicators can help you do it.
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One of these order block indicators is built for MT4.
This MT4 order block indicator will help you quickly identify the critical areas of
supply and demand and the best spots to enter or manage your trades.
This is a premium indicator, but it has many handy benefits.
You can use it simultaneously on four time frames and in any markets you like to
trade.
This indicator is helpful if you like to scalp or swing trade the markets or you like to
trade reversals.
It also comes with a range of handy alerts you can setup.
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Get your MT4 order block indicator here.
Lastly
Order block and smart money trading take some time to practice and master.
A er you start to work out where these big order blocks are being placed and when
to look for stop hunting, you can use it to your advantage.
This vital information can help you get on the right side of the market, and instead
of having your stops hit, you can trade in the direction of the smart money.

Order Block Trading Strategies

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Order Block Trading

What is Order Block Trading?

Big trading institutions and banks usually create these blocks.

An example is 'Bank XYZ' has a huge trade they need to fill.

Order Block Smart Money Concepts

How to Trade With Order Blocks

Order Block Indicator

This is a premium indicator, but it has many handy benefits.

It also comes with a range of handy alerts you can setup.

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