TYPES OF ORDER BLOCK
This educational post is great for beginners who are just starting to grasp the concept of SMC. We've already talked about what an order block is. This time we'll talk about other types of blocks in trading.
✴️ Mitigation Block
Mitigation Block is a sell or buy zone, which is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side.
We all know that when the price is moving along a trend, it is better to open trades in the direction of this trend. The most optimal points for buying and selling are the price pullback. By this logic a mitigation block is formed.
Mitigation Block Sell Scheme
Mitigation Block Buy Scheme
Those who trade classical technical patterns will notice that it is anything but: a support zone becomes a resistance zone, and a resistance zone becomes a support zone. Institutional level traders understand the skills and knowledge of classical technical analysis traders, so they manipulate the price to generate and collect additional liquidity.
In this zone we have our block, an ordinary block, which becomes a mitigated block after an impulse breakout.
Schematically, the Mitigation Block in sell looks like this:
Schematically, Mitigation Block in buy looks like this:
✴️ Breaker Block Smart Money
Breaker Block is a sell or buy zone that is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side. An important difference from a broken Block is that there is a change in market character (CHoCH).
As you have understood, the essence of sell zones and blocks remains the same as in Mitigation Block, but first there is a liquidity grab, and then there is a change in market character (change in market structure). It looks schematically as follows:
Breaker Block Sell Scheme
Breaker Block Buy Scheme
✴️ Rejection Block Smart Money
A Rejection Block is a selling or buying zone that appears on the chart as long candlestick tails at a market high or low.
As in all other cases, the block is formed only after liquidity is grabbed from the previous high/minimum or equal highs/minimums. This is classically referred to as a false breakout or sweep.
Bullish and Bearish Rejection Block
The logic of building and searching for a Rejection Block is very simple:
Bearish Rejection Block: Swing High, find the highest candle whose high and close are higher than the high and close of the neighbouring candles respectively. The tail (wick) of the candle will be the bearish order block.
Bullish Rejection Block: Swing Low, we find the lowest candle, the minimum and close of which are lower than the minimum and close of the neighbouring candles respectively. The tail (wick) of the candle will be a bullish order block. It does not matter what colour the candle is. At the maximum it can be not only bullish but also bearish, and at the minimum it can be not only bearish but also bullish. This is worth paying attention to. Look for the highest candle, with the highest open or close and with the highest wick (same in the opposite direction).
✴️ Vacuum Block Smart Money
A block stands out as a regular gap - from the high of the first candle to the low of the second candle in an up gap and vice versa, from the low of the first candle to the high of the second candle in a down gap.
We can expect 2 variants of price movement: in continuation, return to the gap zone to fill it partially or completely. This is based on the presence and size of the block order.
Complete gap filling
Complete gap filling of the price void can be expected if there is an order block that is above or below the Vacuum Block. The price can bounce from the beginning of Vacuum Block, but in order to reduce the risk it is better to wait until the block is fully closed and touched.
Partial filling of the gap
A partial filling of the price void can be expected if the order block is below or above the Vacuum Block, but they overlap. The price can rebound from the beginning of the Vacuum Block, as well as overlap it completely. This is shown schematically in the figure above.
✴️ Conclusion
You should realize that you don't need to click the "buy" or "sell" buttons where you see one of the block options. An order block is simply a price range where you can consider buying or selling, depending on your preliminary analysis and determining the context of the price movement. You will trade from every block a capital loss is guaranteed. Price moves for liquidity. This is the main analysis, and only then we look for the place (blocks) where we can jump from a less risky place.
✴️ Mitigation Block
Mitigation Block is a sell or buy zone, which is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side.
We all know that when the price is moving along a trend, it is better to open trades in the direction of this trend. The most optimal points for buying and selling are the price pullback. By this logic a mitigation block is formed.
Mitigation Block Sell Scheme
Mitigation Block Buy Scheme
Those who trade classical technical patterns will notice that it is anything but: a support zone becomes a resistance zone, and a resistance zone becomes a support zone. Institutional level traders understand the skills and knowledge of classical technical analysis traders, so they manipulate the price to generate and collect additional liquidity.
In this zone we have our block, an ordinary block, which becomes a mitigated block after an impulse breakout.
Schematically, the Mitigation Block in sell looks like this:
Schematically, Mitigation Block in buy looks like this:
✴️ Breaker Block Smart Money
Breaker Block is a sell or buy zone that is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side. An important difference from a broken Block is that there is a change in market character (CHoCH).
As you have understood, the essence of sell zones and blocks remains the same as in Mitigation Block, but first there is a liquidity grab, and then there is a change in market character (change in market structure). It looks schematically as follows:
Breaker Block Sell Scheme
Breaker Block Buy Scheme
✴️ Rejection Block Smart Money
A Rejection Block is a selling or buying zone that appears on the chart as long candlestick tails at a market high or low.
As in all other cases, the block is formed only after liquidity is grabbed from the previous high/minimum or equal highs/minimums. This is classically referred to as a false breakout or sweep.
Bullish and Bearish Rejection Block
The logic of building and searching for a Rejection Block is very simple:
Bearish Rejection Block: Swing High, find the highest candle whose high and close are higher than the high and close of the neighbouring candles respectively. The tail (wick) of the candle will be the bearish order block.
Bullish Rejection Block: Swing Low, we find the lowest candle, the minimum and close of which are lower than the minimum and close of the neighbouring candles respectively. The tail (wick) of the candle will be a bullish order block. It does not matter what colour the candle is. At the maximum it can be not only bullish but also bearish, and at the minimum it can be not only bearish but also bullish. This is worth paying attention to. Look for the highest candle, with the highest open or close and with the highest wick (same in the opposite direction).
✴️ Vacuum Block Smart Money
A block stands out as a regular gap - from the high of the first candle to the low of the second candle in an up gap and vice versa, from the low of the first candle to the high of the second candle in a down gap.
We can expect 2 variants of price movement: in continuation, return to the gap zone to fill it partially or completely. This is based on the presence and size of the block order.
Complete gap filling
Complete gap filling of the price void can be expected if there is an order block that is above or below the Vacuum Block. The price can bounce from the beginning of Vacuum Block, but in order to reduce the risk it is better to wait until the block is fully closed and touched.
Partial filling of the gap
A partial filling of the price void can be expected if the order block is below or above the Vacuum Block, but they overlap. The price can rebound from the beginning of the Vacuum Block, as well as overlap it completely. This is shown schematically in the figure above.
✴️ Conclusion
You should realize that you don't need to click the "buy" or "sell" buttons where you see one of the block options. An order block is simply a price range where you can consider buying or selling, depending on your preliminary analysis and determining the context of the price movement. You will trade from every block a capital loss is guaranteed. Price moves for liquidity. This is the main analysis, and only then we look for the place (blocks) where we can jump from a less risky place.
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🔻FREE Telegram channel🔻
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