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What Are Order Blocks?
Order blocks, also known as “institutional candles’ and “supply/demand” refers to the specific area where the banks leave their footprints. It is the last up move before the down move or the last down move before the up move.
Order Blocks Vs Supply And Demand
Order blocks and Supply and demand are basically the same thing. They are going to be a way of seeing where the buyers and sellers are in the market. The biggest difference is going to be the way you interpret them from a bank perspective. They are not just an area in which banks bought or sold from. Order blocks are a representation of the last sell move before they bought or the last buy move before they sold.
Why Are Order Blocks Important?
Order blocks are important because it is a form of accumulation or distribution.
How to spot Order Blocks
Order blocks can be spotted by Engulfings, engulfing variations, sell to buys, buy to sells, rally base rallies, drop base drops, drop base rallies and rally base drops.
Bullish and Bearish Engulfing Order Blocks
Bullish Engulfing Order Block
A bullish engulfing order block is a two candle formation of the bullish candle engulfing the previous bearish candle. The bullish candle’s body has to close above the previous wick high.
Bearish Engulfing Order Block
A bearish engulfing order block is a two candle formation of the bearish candle engulfing the previous bullish candle. The bearish candle’s body has to close below the previous wick low.
Bullish and Bearish Engulfing Variation Order Blocks
Bullish and Bearish Engulfing Variations are very similar to engulfing order blocks. The only difference is that it can be more than a 2 candle formation. typically it will be a three candle formation but it can be more. Most of the time, it will be an engulfing order block on a higher timeframe.
bullish engulfing variation Order Block
A bullish engulfing variation is when a bearish candle is engulfed by two or more bullish candles. One of the bullish candles has to close above the first bearish candle’s wick high.
bearish engulfing variation Order Block
A bearish engulfing variation is when a bullish candle is engulfed by two or more bearish candles. One of the bearish candles has to close below the first bullish candle’s wick low.
Sell To Buy And Buy to sell order blocks
A sell to buy and buy to sell orders blocks are used to represent one push of movement. This can be in the form of many candles. Most of the time, it will be an engulfing order block on a higher timeframe.
Sell To Buy Order Block
A sell to buy order block is when you track the entire sell move before the buy move. In other words, the entire push down before price pushes back up. The sell move does not have to consist of all bearish candles. There can be bullish candles present. A sell to buy order block is also considered a bullish order block.
Buy To Sell Order Block
a buy to sell order block is when you track the entire buy move before the sell move. In other words, the entire push up before price pushes back up. The buy move does not have to consist of all bullish candles. There can be bearish candles present. A buy to sell order block is also considered a bearish order block.
Rally Base Rally And Drop Base Drop Order Blocks
Rally base rally and drop base drop order blocks are very similar to sell to buy and buy to sell order blocks. The only difference is that rally base rallies and drop base drops move sideways rather than in any particular direction. it just consolidates before continuing in its original direction.
Rally Base Rally
A rally base rally is when price goes up, stops to consolidate, then continues to go up. You are tracking the consolidation before price goes back up. The amount of candles does not matter. It can be one or many candles. A rally base rally order block is also considered a bullish order block.
Drop Base Drop
A drop base drop is when price goes down, stops to consolidate, the continues to go down. You are tracking the consolidation before price goes back down. The amount of candles does not matter. It can be one or many candles. A drop base drop order block is also considered a bearish order block.
Drop Base Rally And Rally Base Drop Order Blocks
Drop base Rallies and rally base drops are very similar to rally base rallies and drop base drops. The only difference is that price will be going in one direction then reverse into the other direction. Most of the time, it will be an engulfing order block on a higher timeframe.
Drop Base Rally
A drop base rally is when price goes down, stops to consolidate, then reverses to the upside. You are tracking the consolidation before price goes down. The amount of candles does not matter. It can be one or many candles.
Rally Base Drop
A rally base drop is when price goes up, stops to consolidate, then reverses to the downside. You are tracking the consolidation before price goes down. The amount of candles does not matter. It can be one or many candles.
Order Blocks From A Bank Perspective
Bullish Order Block
A bullish order block is a representation of accumulation or reaccumulation on a lower timeframe. In accumulation and reaccumulation, there will be some form of sell side and buy side liquidity. Price will drop down to sweep the sell side liquidity and then go up to sweep the buy side liquidity. That push down to the push up is what the sell move to buy move is. A bullish order block on a higher timeframe is tracking that last sell move that the banks created in accumulation and reaccumulation before they bought.
Bearish Order Block
A bearish order block is a representation of distribution or redistribution on a lower timeframe. In distribution and redistribution there will be some form of sell side liquidity and buy side liquidity. Price will go up to sweep the buy side liquidity and then drop down to sweep the sell side liquidity. That push up to the push down is what the buy move to sell move is. A bearish order block on a higher timeframe is tracking last buy move that the banks created in distribution and redistribution before they sold.
Order block settings
when annotating an order block, I use the rectangle. you can find this from the tool bar on tradingview on the left hand side of the screen. it is the fourth icon down under geometric shapes. you can click the star icon to save it to your favorites. I have the color set to #5c2932 with the opacity set to 20%. I have this saved to a template as “Order Block”.
