Order block
Definition
An order block is the last opposite candle before an impulse that broke market structure: the last bearish candle before a rally gives a bullish order block, the last bullish candle before a drop gives a bearish one. The idea comes from the Smart Money concept: large players are assumed to have built positions in that zone and to defend it when price returns. It is a model, not an observable fact: orders are not visible on the chart, and only price reaction confirms the zone.
How to find an order block
The construction runs backwards: first the impulse, then its source.
- Find the break of structure (BOS). Price has impulsively passed the last significant high (for a rally) or low (for a drop), and the candle closed beyond it.
- Step back to the last opposite candle. Before a rally it is the last bearish candle, before a drop the last bullish one.
- Build the zone. From the candle's body (a narrow zone), from the whole candle with its wicks (a wide one) or from the open to the extreme (a compromise).
- Extend the zone to the right and wait for price to return. Until price comes back, the zone is "fresh".
| Bullish order block | Bearish order block | |
|---|---|---|
| Source candle | last bearish before the rally | last bullish before the drop |
| Impulse after it | broke the previous high | broke the previous low |
| Where the zone sits | below current price | above current price |
| Scenario on return | buy from the zone | sell from the zone |
| Cancellation | body close below the zone | body close above the zone |
The impulse has to be real. In the indicator this is set by the "Min impulse, ×ATR" filter: the OTC preset uses a threshold of 0.6–0.9 ATR, the real-market preset 0.8–1.2 ATR, and a weaker impulse does not create a zone.
The idea behind it and its link to liquidity
The Smart Money logic goes like this: a large participant cannot fill a position with a single order, so part of the volume stays unfilled in the zone the impulse started from. When price returns, those orders trigger again and produce a bounce. This cannot be checked on the chart, so it is more honest to treat an order block as a hypothesis about a reaction zone.
Two phenomena usually go with it. Before the impulse price often makes a liquidity sweep: it runs the stops beyond the nearest low and only then turns, and that run is often the order block candle itself. After the impulse an imbalance (FVG) is often left on the chart: a stretch where the wicks of the first and third candles did not overlap because price passed it too fast. An order block that coincides with an imbalance is considered stronger than a lone zone.
How to trade it in binary options
- Enter only after confirmation. Price has returned into the zone, a candle touched it and closed in the direction of the scenario. Enter at the open of the next candle: a trade cannot be closed early, so an entry "on the touch" without a candle close is guessing.
- Expiry. On OTC start with one candle, on a calm trend on the real market test two.
- One attempt per zone. A repeat entry only after a new contact with the zone or a new zone appearing. Broken zone, cancelled scenario.
- With the higher-timeframe trend. Bullish zones in an uptrend play out more often than against it.
In the terminal
In BinoView Supercharts order blocks are drawn by the Order Blocks indicator: it finds the BOS and the source candle, builds the zone from the body, the wick or the open, recolors it after a retest or a break and merges nearby zones. Imbalances next to the zone are shown by Imbalance Suite, level sweeps by the Liquidity Sweep indicator and the Liquidity Buy/Sell signal indicator. Pairing order blocks with a volume profile in manual trading is covered in the Smart Money strategy.
How it differs from support and resistance
A support or resistance level is built from several bounces off one price and gains weight with each touch. An order block is built from one candle before an impulse and is strongest on the first return: every further touch weakens it. On the chart they often coincide, and that coincidence is the best filter: a zone that is both an order block and a tested level is more reliable than either on its own.
Frequently asked questions
Is an order block the same as a supply or demand zone?
Almost. A supply and demand zone is the broader idea: any area price left with an impulse. An order block is a special case with a strict construction rule: one specific candle before an impulse that broke the last significant high or low. Without a break of structure the candle does not count as an order block, even if price rallied from it.
Do order blocks work on OTC?
As price reaction zones, yes: the Order Blocks indicator has a dedicated OTC preset for short timeframes. But the story about a large player building a position does not fit OTC: the price there is formed by the platform, not by an exchange order book. So on OTC an order block is best treated as an ordinary zone you test with statistics on a demo account, not as a footprint of smart money.
What is order block mitigation?
Mitigation is price's first return into the zone after it appears. The large player is assumed to top up the position at that moment, so the first touch gives the strongest reaction. After mitigation the zone weakens, and if a candle closes with its body beyond the far edge of the zone, the order block is broken (invalidated) and the scenario is cancelled.