ICT order block is a key level area on charts representing a massive buying or selling (buying and selling orders) pressure on a specific price zone. This is an area of interest for institutions to move prices from.
The massive number of orders indicate the involvement of SMART MONEY or institutional buying or selling is about to happen from that specific area of price.
Order Block is one of the pd arrays which Micheal j huddleston suggested and we discussed ICT PD ARRAYS in our last article. This is a key level area a trader should position himself to take a trade.
A trader must identify where the institutions are getting involved in price action so Aligning himself with a position with Large institutional orders should always be a wise decision.
HOW TO IDENTIFY AN ORDER BLOCK ON CHART?
Since we know the significance of an ICT ORDER BLOCK , we must identify the order blocks on our charts to get an entry from.
Bullish Order Block:
A bullish order block is a last bearish candle before the bullish impulse shift. When price is making lows towards downside by printing bearish candles and it wants to reverse from any specific price or key level areas from bearish to bullish it prints one last bearish candle followed by big green bullish engulfing (usually) candle dominating the last bearish candle with impulse shift.
There should be two conditions should meet in order to find a valid Bullish order block
- Bullish candle should take low (liquidity) of last bearish candle and closes above
- Body should be closed above the bearish candle’s opening price (impulse shift not with wick only)
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Now this last bearish candle prior to this impulsive bullish candle is now Bullish Order Block.
Bearish Order Block:
A bearish order block is a last bullish candle before the bearish impulse shift. When price is making highs to upside by printing bullish candles and it wants to reverse from any specific price or key level areas from bullish to bearish it prints one last bullish candle followed by a big red bearish engulfing (usually) candle dominating the last bullish candle with impulse shift.
There should be two conditions should meet in order to find a valid Bearish order block
- Bearish candle should take high (liquidity) of last bullish candle and closes below
- Body should be closed below the bullish candle’s opening price (impulse shift not with wick only)
Now this last bearish candle prior to this impulsive bullish candle is now Bearish Order Block.
HOW TO TAKE AN ENTRY FROM ICT ORDER BLOCK?
ICT ORDER BLOCKS are the ICT PD ARRAYS which can be used as a key level area to take an entry from. Since we know time is fractal so order blocks can be used on all time frames according to our strategies.
High Time Frame Order Blocks:
Order blocks created on high time frames are the key levels or pd arrays which are the area market makers should use to take price reversals from. Order blocks should be marked on a High time frame.
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Order blocks which grab previous candles liquidity are the highly probability order blocks. When order blocks are marked on our charts we need to wait for retracement on high time frame
BUY ENTRY FROM BULLISH ORDER BLOCK:
In a bullish order block trading strategy we would be looking for price reversal from bearish to bullish trend from a specific level and High time frame bullish order block will give a support to take a reversal from bearish to bullish.
When price was bearish and reached our marked High time frame order block it should give an impact if a price is going to reverse from this order block it should be rejected so
HOW TO TAKE A BUY ENTRY FROM A BULLISH ORDER BLOCK?
When you find the bullish order block, it means it was a move involving institutions so you need to wait for the price to test the bullish order block zone to execute a buy trade.
To take an entry from a bullish order block we need to go into a lower time frame and wait for a market structure shift (MSS) as we already discussed market structure shift in our previous article.
On a low time frame, wait for price to make higher highs with displacement or power full impulsive bullish candles; these are the footprints of institutional involvement in reversal from bearish to bullish. We can take an entry after a low time frame market structure shift according to our risk management.
Note: we can also mark low time frame new low time frame order blocks when price retraces back into a low time frame order block we can take an entry from.
SELL ENTRY FROM BEARISH ORDER BLOCK:
In a bearish order block trading strategy we would be looking for price reversal from bullish to bearish trend from a specific level and High time frame bearish order block will give a resistance to take a reversal from bullish to bearish trend.
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When price was bullish and reached our marked High time frame order block it should give an impact if a price is going to reverse from this order block it should be rejected so
HOW TO TAKE A SELL ENTRY FROM BEARISH ORDER BLOCK?
When you find the bearish order block, it means it was a move involving institutions so you need to wait for the price to test the bearish order block zone to execute a sell trade.
To take an entry from a bearish order block we need to go into a lower time frame and wait for a market structure shift (MSS) as we already discussed market structure shift in our previous article.
On a low time frame, wait for price to make lower lows with displacement or power full impulsive red bearish candles; these are the footprints of institutional involvement in reversal from bullish to bearish. We can take an entry after a low time frame market structure shift according to our risk management.
Note: we can also mark low time frame new low time frame order blocks when price retraces back into a low time frame order block we can take an entry from.
SENSITIVE AREA OF AN ORDER BLOCK:
An order block typically acts as a support or resistance but with a single candle on any time frame but 50% area of an order block should not be mitigated with the candle’s body.
When a price taps on order blocks it should not get through more than 50% of the order block which is a mean threshold of an order block also called consequent encroachment (will be discussed in upcoming articles). This is a highly sensitive area for price to get reversed if the order block is going to hold prices successfully.
If price does not get rejected from 50% of order block and closes tapping candle’s body below 50% this makes this order block invalid or low probability order block.
Final Thoughts
Since we know time is fractal order blocks can be used on all time frames. Order blocks can be used on high time frame as our High time frame pd arrays and also can be used on low time frame when taking an entry from a key level or any ICT PD ARRAY (along with order block).
When we shift into a low time frame to take an entry from we need to wait for price to make a market structure shift. When price shifts its structure on a low time frame it also prints low time frame order blocks we can mark these low time frame order blocks and when price retraces back into these order blocks we can pull the trigger buy or sell button according to the scenario.
