Order Block Trading: Combining Order Flow
In the world of trading, understanding market structure is crucial for success. One of the most powerful yet misunderstood concepts is the order block. ...
In the world of trading, understanding market structure is crucial for success. One of the most powerful yet misunderstood concepts is the order block. Unlike traditional supply and demand zones, order blocks represent specific price zones created by institutional players executing large positions in a strategic manner. These zones act as magnets for price reversals, offering high-probability setups with favorable risk-reward ratios. This article will demystify order blocks, explaining exactly what they are, how to identify them, and how to trade them effectively. By the end, you'll have a clear understanding of this institutional trading strategy and how to incorporate it into your own trading approach. Order blocks are price zones created when large financial institutions (banks, hedge funds, etc.) execute massive positions in a way that avoids market impact. Instead of placing a single large order that would move the price against them, they split their position into multiple smaller orders across a narrow price range. This creates a "block" of price levels where they've executed their trade. The key insight is that these zones become magnets for price reversals.