Order Block
An order block is the last opposing candle before a strong impulsive move, marking where institutional traders placed large orders. Traders enter when price returns to an unmitigated block, in the direction of the impulse, with the stop beyond its far edge. The best blocks create a break of structure with 1.5+ ATR displacement and are avoided after two touches.
◆Full guide: Order Blocks: The Complete Trading Guide — Types, Grading and the Three Entry Models
What it means
An order block (OB) is the last opposing candle before a significant impulsive move in the opposite direction. In a bullish order block, the OB is the last bearish (red) candle before a strong upward displacement. In a bearish order block, it is the last bullish (green) candle before a strong downward displacement. The candle marks the price zone where institutional traders absorbed retail flow and committed to building a large position.
Order blocks are one of the four core pillars of Smart Money Concepts (SMC) trading, alongside Fair Value Gaps, liquidity, and market structure. The concept originated in ICT (Inner Circle Trader) methodology and overlaps with the Wyckoff theory of accumulation: an order block is essentially the last point of supply before a Sign of Strength bar.
Not all order blocks are tradeable. The highest-quality OBs share five attributes: they create a Break of Structure on the impulse leg, they produce a clear displacement candle (1.5+ ATR), they have not been mitigated (price has not yet returned to test them), they sit at a higher-timeframe point of interest, and they form during institutional sessions (London Open or New York Open). Quantum Algo grades every detected order block on these five attributes and presents only A-grade OBs as actionable signals.
When price returns to a valid order block, the typical trader response is to enter a position in the direction of the original impulse, with a stop-loss placed beyond the far edge of the OB. Take-profit targets are usually set at the next significant liquidity pool. Order blocks that have already been tested once (mitigated) lose probability with each subsequent test and are generally avoided after two touches.
How to identify it on a chart
- Find a displacement move that breaks structure.
- The last opposing candle before it is the order block — mark its body (or full range).
- Trade the first return into it; discard it after two mitigations.
Worked example
BTC prints a red candle at 63,900–64,050, then three green candles that break the previous high. The red candle is the bullish OB; the return to 64,000 six hours later is the long.
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Frequently asked questions
How do I identify a valid order block?
A valid order block is the last opposing candle before a strong displacement that creates a Break of Structure. The displacement candle should be at least 1.5 times the average true range (ATR) of the prior 14 candles. The order block should also be unmitigated — price should not have already returned to test it.
What is the difference between an order block and a supply/demand zone?
Order blocks are derived from a specific candle that produced an impulsive move with a Break of Structure. Supply/demand zones are broader areas defined by where price reversed previously. Order blocks are precise; supply/demand zones are approximate. SMC traders prefer order blocks because they are anchored to a specific institutional event.
How long does an order block remain valid?
An unmitigated order block can remain valid for weeks or even months on higher timeframes. The validity is destroyed only when price returns to the OB, fails to react, and breaks through with displacement in the opposite direction — at which point the OB becomes a breaker block.
Related terms
See Order Block on your TradingView chart
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