Order Block trading is a powerful technique in the financial markets that focuses on identifying key areas where institutional or “smart money” has entered or exited positions.
What is an Order Block in Forex Trading?
An order block is a price area on a chart where large financial institutions (like banks) place significant buy or sell orders. These blocks show where major market players are active, and these areas often cause price to reverse or continue in a specific direction when revisited.
Think of an order block as a “zone of interest” where big money is at work. When price returns to these zones, it often reacts in predictable ways, giving regular traders like us a chance to join the moves made by larger market participants.
What is ICT Order Blocks?
ICT defined order block as “the change in the state of delivery of price.” This definition comes from a popular trading educator and focuses on how price movement changes at certain points on the chart. ICT order blocks are specific zones that show where smart money (institutional traders) has entered the market before making a significant move.
What is a ICT Bullish Order Block?
An ICT Bullish Order Block is the last down closing candle or a series of down closing candle before the price moved in upward direction. Before the price aggrive movement in upward direction price is moving in a tight range. This aggressive price movement in upward direction break this tight range and indicating bullish sentiment.
Bullish order blocks represent areas where large buyers initially accumulated positions before pushing the price higher. When price returns to these levels, these same buyers often step in again, creating another buying opportunity.
What is a ICT Bearish Order Block?
Bearish or ICT Bearish OB are the last upclsogn candles beofre the price moves in downad direction.
Bearish order blocks show where major sellers placed orders before driving the price down. When price revisits these areas, the same selling pressure often returns.
How to Identify Order Blocks
Finding order blocks on your charts isn’t complicated once you know what to look for:
- Look for a strong, decisive move in price (either up or down)
- Trace backward to find the last opposite-colored candle before that move began
- This candle (or group of candles) is your order block
The most important feature is that the order block must come immediately before a strong impulse move. The stronger and more decisive the move that follows, the more significant the order block.
How to Draw Order Blocks
Drawing order blocks accurately will help you spot potential trading opportunities. Here’s a simple process:
- Identify the last opposing candle before a strong impulse move
- For bullish order blocks: Draw a rectangle covering the entire bearish candle that precedes an upward move
- For bearish order blocks: Draw a rectangle covering the entire bullish candle that precedes a downward move
- Pay special attention to the “fair value gap” – the unfilled price area within the order block
Some traders only focus on the 50% to 70% zone of the order block, as price doesn’t always return to the full block before reacting.
What Makes an Order Block Valid
Not all order blocks are created equal. The strongest ones have these qualities:
- They precede an unusually strong price move (the stronger the move, the better)
- The move after the order block creates multiple candles without retracing
- The block hasn’t been completely consumed by later price action
- The order block is aligned with the higher timeframe trend
- There’s a clean “break of structure” after the order block
An order block remains valid until price completely moves through it or creates a new order block in the same area.
Order Block Examples
Example 1: Bullish Order Block
On the EUR/USD 4-hour chart, we might see a single red (bearish) candle followed by five strong green candles moving upward. The red candle is our bullish order block. When price eventually returns to this zone weeks later, it creates another buying opportunity as price bounces from this level.
Example 2: Bearish Order Block
Looking at the GBP/USD daily chart, we might find a green (bullish) candle followed by a sharp drop over several days. This green candle is our bearish order block. When price climbs back to this level in the future, it often struggles to move higher and drops again, creating a selling opportunity.
Difference Between Fair Value Gap and Order Block
Order blocks are the change in the state of price delivery by trading algorithms. They represent zones where smart money shows interest at particular pricing levels.
Fair value gap is a three candlestick pattern. It indicates that price is delivered inefficiently or moves strongly in one direction.
Order Block vs Fair Value Gap Comparison
| Feature | Order Block | Fair Value Gap |
|---|---|---|
| Definition | Last opposing candle before strong impulse move | Gap in price created by rapid movement |
| Change in state of price delivery | ✅ Yes | ✅ Yes |
| Three candlestick pattern | ✅ Often observed | ❌ Not required |
| What It Shows | Interest of smart money at specific price levels | Price moved inefficiently in one direction |
| Formation | Last opposing candle before strong impulse move | Gap in price created by rapid movement |
| Trading Significance | High probability reversal zone | Area likely to be revisited by price |
Breaker Block vs Order Block
Breaker blocks are opposite or failed order blocks. When an order block fails, it can convert into a breaker block. A bullish order block can become a bearish breaker block and vice versa.
Order Block vs Breaker Block Comparison
| Feature | Order Block | Breaker Block |
|---|---|---|
| Origin | Forms before strong impulse move | Created from a failed order block |
| Direction | Trades in direction of the following impulse | Trades in opposite direction of original OB |
| Formation | Last opposing candle before impulse | Former order block that failed to hold |
| Reliability | Primary trading opportunity | Secondary opportunity after failure |
Complete Order Block Trading Strategy
- Determine Daily Market Bias: On the daily chart, identify whether the market is in an uptrend (higher highs & higher lows) or a downtrend (lower highs & lower lows).
- Identify Higher-Timeframe Order Blocks: Switch to the 4H or 1H chart and mark the last bullish candle before a strong downward impulse (for shorts) or the last bearish candle before a strong upward impulse (for longs).
- Validate Momentum Leaving the Zone:Confirm the candle after your candidate block is a sharp, single-directional bar with minimal overlap—a sign of institutional orders pushing price rapidly.
- Prioritize Recency:Give greater weight to more recent Order Blocks, since older ones are often “washed out” by subsequent price action.
- Check Daily Support/Resistance Confluence:See if your Order Block zone lines up with a major support or resistance level on the daily chart, adding extra validity.
- Run Currency Correlation Analysis:For FX pairs, confirm your setup by checking a strongly correlated pair (e.g., if you’re on EURUSD, see how GBPUSD behaves in the same zone).
- Drop to Lower-Timeframe for Execution:Move down to the 30-minute or 15-minute chart to hunt for precise entry signals within your marked Order Block.
- Identify Fair Value Gaps (FVGs):Spot any gaps or inefficiencies in price inside your Order Block—these fill zones often act as magnet points for retracements.
- Apply Optimal Trade Entry (OTE):Draw Fibonacci retracement on the impulse leg and look for price to retrace into the 61.8–79% OTE zone, ideally overlapping your FVG/Order Block.
- Wait for Price Rejection:Be patient—enter only after seeing a rejection candle (e.g., long wick or pin bar) or other ICT Killzone confluence inside your entry area.
- Define Stop-Loss & Position Size:Place your stop just beyond the furthest edge of the Order Block (including any FVG tails), and size your position so you risk only 1–2% of your account.
- Set Profit Targets:Plan exits at logical levels: prior swing highs/lows, the next Order Block, or subsequent FVG clusters, aiming for at least a 1:2 reward-to-risk ratio.
Common Frequently Asked Questions (FAQ)
What is the typical success rate of Order Block trading?
Traders who apply strict confluence rules (daily bias + correlated pairs + valid OB + FVG + OTE + price rejection) often report win rates in the 70–85% range. Remember, real-world performance depends on discipline, trade management, and market conditions.
Which timeframes should I used to find OB?
Daily chart: Determine overall market bias (bullish or bearish).
4-hour (4H) / 1-hour (1H): Identify and validate Order Blocks.
30-minute (30M) / 15-minute (15M): Refine entries using FVGs, OTEs, and price-action signals.
What makes an Order Block more reliable?
Strong momentum: Sharp, single-direction candles “leaving” the zone.
Recency: More recent blocks tend to hold better than older ones.
Confluence: Alignment with daily support/resistance, correlated-pair confirmation, and overlapping FVGs/OTEs.
Clean structure: Minimal wick overlap inside the block.
How do Fair Value Gaps (FVGs) and Optimal Trade Entries (OTEs) improve my entries?
FVGs highlight price inefficiencies within the Order Block that often get “filled” on pullbacks.
OTEs (61.8–79% Fibonacci retracements of the prior impulse) narrow the entry zone for higher precision and better reward-to-risk.
Who invented Order Blocks and where did the concept come from?
Michael J. Huddleston (the Inner Circle Trader) introduced Order Blocks as part of his Smart Money Concepts framework in 2016, teaching them initially in private mentorships before wider publication online.
Do I need to worry about news events?
Yes—major economic releases can whip price through institutional zones and invalidate setups. Either avoid trading during high-impact windows or use very wide stops and smaller size if you choose to trade.
What’s the recommended risk management?
Risk per trade: 1–2% of account equity.
Stop-loss: Beyond the furthest edge of the Order Block (including any FVG tails).
Reward-to-risk ratio: Minimum 1:2, aiming for 1:3+ on strong moves.
Download Order Block Trading Strategy PDF
Unlock the institutional edge with our comprehensive Order Block Trading Strategy PDF.
Learn how to identify high-probability setups using smart money concepts and refine your entries like a pro.
✅ Discover how banks and institutions leave footprints on the chart
✅ Learn to mark valid bullish and bearish order blocks
✅ Master entry and exit rules with real chart examples
✅ Bonus: Risk management tips tailored to order block trades
🎯 Whether you’re a beginner or an experienced trader, this guide will help you trade with precision and confidence.
Click on the below Download now and start trading like the smart money!