What Is Order Block?
An order block (OB) is a price zone where significant institutional buying or selling occurred, identified as the last bearish candle before a strong bullish move (bullish OB) or the last bullish candle before a strong bearish move (bearish OB). The theory is that institutions could not fill their entire position in one move, so when price returns to the OB zone, remaining orders will be filled, causing a reaction.
How Order Block Works
A valid order block typically has: a clear impulsive move away from the zone (indicating strong interest at that level), a break of structure following the move (confirming institutional commitment), and price has not yet returned to mitigate (fill) the zone. When price returns to an unmitigated OB, it often reacts with a bounce (bullish OB) or rejection (bearish OB).
Why It Matters for Traders
Order blocks provide high-probability entry zones with tight risk management. The invalidation is clear: if price moves completely through the OB zone without reacting, the setup is invalid (stop placed just beyond the OB). Combined with BOS confirmation and higher-timeframe alignment, OB entries offer favorable risk-reward ratios. The most reliable OBs are those on higher timeframes (4H, daily) that align with overall trend direction.
