ICT Order Block – Bullish & Bearish Order Blocks
Do you want to master ICT order block trading strategy like a pro to level up your trading?
Order block trading strategy is one of the various strategies used in technical analysis to predict the future move of any asset like forex currency pairs, commodities, crypto, stocks or indices. This strategy originates from smart money concepts & its foundation lies on the concept of order blocks.
In this article, we will teach you all about order block trading strategy from definition to its formation and identification to its use along with visual examples.
Lets start with defining order blocks.
What is ICT Order Block?
Order block is the zone/area in a price chart, where a large number of orders are executed by institutional traders in the market and market shows sudden strong move from that area.
Retail traders follow institutional foot prints, so they wait for these order block zones to buy or sell in the market & make profit along with big institutions like banks.
As we know market has two price moves bullish & bearish. So on the basis of price moves, order blocks are divided into two types.
(I) Bullish Order Block
(II) Bearish Order Block
Bullish Order Block – A bullish order block is the last bearish candle before the bullish impulse (strong sudden) move, it typically consist of two candles, with the first candlestick being a bearish and the second candlestick being a bullish one.
But to identify a valid bullish order block you need to check following things.
(I) Second candle being a bullish candle, should grab the low of previous bearish candle. Price should go below the low of previous bearish candle.
(II) Second candle being a Bullish candle should close above the high of previous bearish candle.
(III) Imbalance in lower time frame in the order block zone.
(IV) Structure shift in lower timeframe.
To sum it up we can say, second candle should completely engulf the first candle – body to body & wick to wick.
Bearish Order Block – A bearish order block is the last bullish candle before the bearish impulse move, it typically consist of two candles, with the first candlestick being a bullish and the second candlestick being a bearish one.
But to identify a valid bearish order block you need to check following things.
(I) Second candle being a bearish candle, should grab the high of previous bullish candle. Price should go above the high of previous bearish candle.
(II) Second candle being a bearish candle should close below the low of previous bullish candle.
(III) Imbalance in lower timeframe in the order block zone.
(IV) Structure shift in lower timeframe.
To sum it up we can say second candle should completely engulf the first candle – body to body & wick to wick.
Bullish Reversal Order Block Trading Strategy
In bullish reversal order block trading strategy we look for trend reversal from bearish to bullish and then execute a buy trade utilizing a bullish order block.
When market trend is bearish and it approaches a demand zone where we seek reversal of market and at that area market breaks its structure to the opposite (Bullish) side then we look for the order block at the bottom of the impulse move which changed market trend.
When we find a bullish order block in that move, it means it was a move involving institutions so we need to wait for the market to test the bullish order block zone to execute a buy trade.
When market retrace back and test the bullish order block zone we can execute a buy trade.
A real market example is shown below in the picture.
When trading using bullish Order block trading strategy our stop loss will be 10/20 pips below the low of order block zone.
Bearish Reversal Order Block Trading Strategy
In bearish reversal order block trading strategy we look for trend reversal from bullish to bearish and then execute a sell trade utilizing a bearish order block.
When market trend is bullish and it approaches a supply zone where we seek reversal of market and at that area market breaks its structure to the opposite (Bearish) side then we look for the order block at the bottom of the impulse move which changed market trend.
When we find a bearish order block in that move it means it was a move involving institutions so we need to wait for the market to test the bearish order block zone to execute a sell trade.
When market retrace back and test the bearish order block zone we can execute a sell trade.
A real market example is shown below in the picture.
When trading using bearish Order block trading strategy our stop loss will be 10/20 pips above the high of order block zone.
Order blocks can also be found in a trend after a pull back and these order blocks confirm the strength of trend. We can use these order blocks to trade the trend or to add new positions in the trend.
Like in a bearish trend after a bullish pullback a bearish order block may form, which confirms the strength of bearish trend and we can add a new sell order to enjoy the bearish trend.
Likewise in a bullish trend after a bearish pullback a bullish Order block may form which confirms the strength of bullish trend and we can add a new buy order to enjoy the bullish trend.
