What are Order Blocks?
An Order Block is a technique used in Technical Analysis to identify the accumulation or distribution of big or institutional traders. In other words, it is an area where big institutions pile up their orders to enter or exit the market.
Spotting these Bullish or Bearish Order Blocks helps you find the Levels where Price is likely to Reverse when price revisits these areas.
Bullish and Bearish Order Blocks
At PacifyPro we developed an indicator for Tradingview which automatically adds all Bullish and Bearish Order Blocks on your chart and on every time frame. However, it’s always good to understand where these levels are coming from and how you could draw these yourself.
A Bullish Order Block is formed in a chart when the Body of a Bullish Candle overtakes its previous Bearish Candle. A Bearish Order block would mean that a Body of a Bearish Candle overtakes its previous Bullish Candle:
You can notice in this illustration that as soon as the price revisits the Bullish Order Block it will reverse and move up. As soon as the price revisits the Bearish Order Block it will again reverse and move down in this case.
Order Blocks vs Time Frame
The Time Frame is a very important and significant thing to keep in mind when trading Order Blocks. The higher the time frame, the more significant the level. This means that drawing Order Blocks on a Weekly time frame are more likely to hold than Order Blocks on a 15-minute time frame:
|Time frame||Order Blocks|
|High (Daily, Weekly, Monthly)||(Relatively) Strong|
|Low (Hourly, 15-minute)||(Relatively) Weak|
Trading Order Blocks
Order Blocks are a very helpful tool to decide where to enter or exit a market. If you want to enter a market, place your bids at the top of a Bullish Order Block for example. Your Stop-Loss can be just below the Bullish Order Block and your target can be found by spotting the next Bearish Order Block(s).
Together with our Support and Resistance Indicator for Tradingview this is a great way to develop a Trading Plan.
We have also developed an indicator for Tradingview which identifies all Bullish and Bearish Order Blocks on every chart and on every time frame. Off course this saves you a lot of time trying to find all these Liquidity Zones yourself.
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