Order Blocks are one of the most effective Smart Money Concepts (SMC) tools used for identifying institutional buying and selling zones. Unlike traditional indicators such as the moving average, RSI indicator, MACD indicator, or stochastic oscillator indicator, Order Blocks reveal where big financial institutions placed their orders. This allows retail traders to follow smart money instead of fighting against it. In this guide, AZBroker breaks down how to trade Order Blocks for precise, high-probability entries across forex, commodities, crypto, and stock markets.
What Are Order Blocks?
An Order Block is the last bullish candle before a bearish move (for a supply zone) or the last bearish candle before a bullish move (for a demand zone). These candles represent:
- Institutional accumulation
- Institutional distribution
- Strong imbalances
- Future areas where price may return
They often coincide with concepts such as price action, multiple time frame analysis, and confluence trading strategy.
When combined with strong candlestick signals like the engulfing pattern, Doji candlestick, hammer candlestick, or shooting star candlestick, Order Blocks become even more reliable.
Why Order Blocks Work
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Order Blocks form because large institutions cannot place massive orders at once doing so would move the market instantly. Instead, they spread their orders across specific price zones.
These zones act as:
- High-probability entry points
- Strong support and resistance
- Areas of liquidity
- Targets for price to return during retracements
This behavior aligns perfectly with concepts like breakout trading, false breakout pattern, and support and resistance in forex.
How to Identify Order Blocks
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1. Find the Impulse Move
Order Blocks always occur before a strong market move. Look for:
- Fast expansion candles
- Large ranges
- Momentum indicators like the Rate of Change (ROC indicator) or momentum indicator mt5 showing strong direction
The clearer the impulse, the more important the Order Block.
2. Locate the Last Opposite Candle
For a bullish Order Block:
- Identify the last bearish candle before a major bullish impulse.
For a bearish Order Block:
- Identify the last bullish candle before a major bearish impulse.
Use confirmation from patterns like:
- bullish flag pattern
- rising wedge pattern
- head and shoulders pattern
These signals help confirm the validity of the zone.
3. Use Multiple Time Frame Analysis
Using multiple time frame trading strategy helps traders:
- Find institutional Order Blocks on higher timeframes
- Refine entries on lower timeframes
- Avoid weak or fake zones
Bigger timeframes = stronger Order Blocks.
4. Combine Indicators for Added Confirmation
Although Order Blocks rely on price action trading, indicators help validate setups:
- ATR indicator strategy → determines stop-loss distance
- Bollinger Bands indicator → shows volatility expansion
- OBV forex → confirms volume strength behind the move
- pivot points strategy → aligns zones with major turning points
This adds powerful confluence.
5. Wait for the Retracement
Price often:
1. Breaks away from the Order Block
2. Returns to retest it
3. Continues in the original direction
This creates some of the cleanest entries in trading.
Look for reversal signals like the engulfing pattern or inverted hammer pattern during the retest.
Conclusion
Order Blocks allow traders to enter the market with precision by identifying where institutional orders were placed. By combining Order Blocks with strong price action, multi-timeframe analysis, and confluence tools such as the RSI forex, MACD trading, or Fibonacci retracement strategy, traders gain accuracy and confidence in their setups. With guidance from AZ Broker, you can integrate Order Blocks into a structured trading approach and improve your ability to trade like smart money.