What it means
A bullish order block is the last down candle (or group of down candles) before a strong move up that breaks structure. A bearish order block is the last up candle before a strong move down that breaks structure.
The zone is usually drawn from the candle's open to its low (bullish) or open to its high (bearish); some traders use the full range.
Why traders use it
The idea is that large participants built positions there, and some orders may remain. When price returns, those participants may defend the area.
Without the break of structure, any candle could be called an order block; the BOS is what makes it objective.
Chart examples
Bullish order block
Bearish order block
How to identify it objectively
- 1Find a displacement move that closes beyond a swing (BOS).
- 2Locate the last opposite-coloured candle before that move.
- 3Draw the zone from its open to its extreme.
- 4It stays valid until a candle closes through the far side.
Bullish use
- 1Last bearish candle before a bullish BOS.
- 2Price retraces into the zone.
- 3A bullish close in the zone suggests the block is respected.
Bearish use
- 1Last bullish candle before a bearish BOS.
- 2Price rallies into the zone.
- 3A bearish close in the zone suggests the block is respected.
What confirms it
- The move away broke structure with displacement.
- The block has not been revisited yet (first retest).
- Direction agrees with the higher timeframe.
What invalidates it
- A candle closes through the far side of the block.
- No BOS came out of it.
How a hypothetical setup is built
Entry
Limit order at the top of a bullish block (or its 50%), or a confirmation close inside it.
Stop
Below the block's low.
Target
The weak high created by the BOS, or the next liquidity above.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Fair Value Gaps & Order BlocksBreaker Block
- Fair Value Gaps & Order BlocksMitigation Block
- Market StructureBreak of Structure (BOS)
Historical testing
Not tested on The Tradeskill yet. Results depend strongly on how the block is drawn (body vs wick, single vs multiple candles); test each version separately.
Limitations: when it fails
- Almost every move has a "last opposite candle", so without strict rules order blocks are everywhere.
- Second and third retests tend to weaken.
- The institutional-order story cannot be verified from candles.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.