Order Blocks
An order block is the last opposing candle before a strong move. It marks where institutional orders sit and where price tends to return.
Defining an order block
A bullish order block is the last down-candle (bearish candle) before a strong bullish move that breaks structure upward. A bearish order block is the last up-candle before a strong bearish move that breaks structure downward.
The logic: the large move that follows was initiated from that candle, meaning institutional orders were filled there. Price often returns to that area to re-test it before continuing — this is your high-probability entry zone.
What makes a strong order block
Not every last opposing candle is a tradeable order block. The strongest order blocks are followed by a move that breaks structure (a BOS) and leaves an imbalance (a Fair Value Gap). If the move away is weak or choppy, the order block is likely low quality.
A high-quality order block also tends to have a long wick on one side and a strong body that moves away quickly — evidence of real institutional intent, not just noise.
Using order blocks in your plan
The classic SMC entry waits for price to sweep liquidity, show a CHoCH, then return to the order block that initiated the new move. You enter at the order block with your stop beyond the sweep extreme and your target at the next liquidity pool.
Order blocks work best when they align with higher-timeframe structure and liquidity. An order block in the direction of the higher-timeframe trend, taken after a higher-timeframe liquidity sweep, is the highest-probability setup in SMC.
Marking and trading an order block
GBPUSD is consolidating at 1.2620. A single bearish candle prints at 1.2610–1.2625, then a massive bullish move breaks the 1.2700 high and keeps going.
- 1Mark the last down-candle before the structural break: 1.2610–1.2625 is your bullish order block.
- 2Check its quality: the move away broke structure (BOS above 1.2700) and left a gap between candles — an FVG. Strong block.
- 3Wait. Price rallies, then pulls back for days until it returns to 1.2625 — the origin of the move.
- 4Enter long at the block, stop below 1.2600, target the next liquidity pool above 1.2780. Price respects the origin and continues.
Institutions don't chase — they return to where they built the position. The order block is where you join them.
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