Lesson 5 Order Blocks-1

Lesson 5: Order Blocks
Order Blocks (OB’s)

Order blocks are important for trends. When price retraces back into them, price should
not break through the body of these candles. If price manages do that, then price is
suggesting it has terminated the current trend or is exhausting itself out. Higher Time
Frame (HTF) OB’s are of more importance and should always be favoured when looking
at the price trend.
These are represented on the chart on any time frame, by a continuous, unbroken
series of uptrend or downtrend candles, before an energetic displacement up or down.
These series of candles are actually a single order that is placed and being filled. The
more candles that are present within an unbroken series, the larger the order is.
Bullish Order Blocks
Bearish Order Blocks
Lesson 5: Order Blocks 1

Higher Probability OB’s
These occur under the following settings:
price enters a HTF POI
liquidity grab
Displacement, mss, imbalance.
By identifying these points on the trading screen, you will be able to distinguish between
trading with the trend/draw on liquidity vs trading against them.
(You’ll know when the trade immediately goes green and you panic to take your profits
quickly, instead of the common prayer of hope and cusses at the screen).
Bearish OB’s
These are the green candles before the displacement and mss down. Here is a general
template of what that looks like.
$$$ is liquidity being taken from buyside.

Bullish OB’s
These are the red (I use black) candles before the displacement and mss up. Here is a
general template of what that looks like. $$$ is liquidity being taken from sellside.
Using Order Blocks to Minimize Risk

The idea is to use OB’s as a guide to know where we can enter and/or close our
position. They let us define our R for each trade. Let’s take a look at some of samples
using our higher probability guide for OB’s.
Bullish Scenarios
• HTF PoI
• Liquidity
• Displacement + mss
Price runs recent lows and then aggressively displaces up. It creates an imbalance/FVG
and leaves behind an OB (demand zone). However, we DON’T have a clear mss just
yet.
What should we expect?
Price to renter the FVG and/or OB and move aggressively away! This is what happens.
Now we have displacement BUT this time WITH mss!

This is our updated structure:
The second displacement leads to the mss we were waiting for. Now we can look to add
long in the second set small FVG and/or OB. Price enters the FVG and OB. We take our
entry at the OB. Our Stop goes below the lowest OB and we watch for price to
aggressively move away from this area to take out our target above!

If you’re vigilant, you’ll notice that retracements into our FVG’s and OB’s are becoming
future OB’s! This is a sign of a bullish trend (a bullish PD Array).
Bearish Scenario
• HTF PoI
• Liquidity
• Displacement + mss

We have our HTF PoI from the daily chart (will review this in future lessons). Price then
runs recent highs ($$$) into our HTF PoI. We then have displacement to the downside
taking out the recent swing low. This gives us our mss!
These conditions are ideal for our short setup. Now we want to see price retrace back
into the imbalances and towards our OB. Where are they?

Price enters our FVG/OB where we will like to enter short. Our stops are indicated on
the chart at the last green candle close before the displacement down. Our target is
shown below.
Here is the final picture of the entire move. The displacement down from our area to
enter short becomes a what? An OB! Look how price to the right enters into the green
candle that forms from our area short and fails to break higher (a little more advanced
but the same concept - will review shortly in future lessons).
Why do Order Blocks work?

We have to think in terms of liquidity for our structure. We want to see old structure
break and then gives us our setup in either the long or short direction. Why? It takes out
old ‘players’ in the game (liquidity) and allows big/smart money to reposition themselves
and take advantage of ‘easy’ liquidity to do so.

Order blocks represent an area of liquidity that has been taken. The resting orders in
that area have been filled and we should see price begins to aggressively move away
from here. Or it can consolidate and then displace away from here (context matters).
The same logic is used for FVG’s as they are usually found with order blocks.
Summary/Checklist
HTF POI (future lesson on this)

Liquidity
Displacement
Market Structure Shift

Imbalance/OB/FVG
Target Liquidity

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Lesson 5: Order Blocks

Order Blocks (OB’s)

Bullish Order Blocks

Bearish Order Blocks

Lesson 5: Order Blocks 1

price enters a HTF POI

Displacement, mss, imbalance.

$$$ is liquidity being taken from buyside.

Lesson 5: Order Blocks 2

Using Order Blocks to Minimize Risk

Lesson 5: Order Blocks 3

What should we expect?

Lesson 5: Order Blocks 4

Lesson 5: Order Blocks 5

Lesson 5: Order Blocks 6

Lesson 5: Order Blocks 7

Why do Order Blocks work?

Lesson 5: Order Blocks 8

HTF POI (future lesson on this)

Market Structure Shift

Lesson 5: Order Blocks 9

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