What is ICT Order Block and How to Trade it
👉🏻 ICT order block is basically an area on the price chart which indicates the huge institutional orders and signals the strong reversal or continuation of price.
You can use the order block as a confirmation of your trade entry or for the reversal of price.
In this article, we will teach you all about order block trading strategy from definition to its identification and to use along with examples.
You can jump to the part of this guide, you are most interested in or you can continue reading the whole article :
Table of Contents 👇🏻
1 : What is ICT Order Block?
2 : Types of Order Block
3 : Bullish Order Block
4 : Bearish Order Block
5 : Bullish Order Block Trading Strategy
6 : Bearish Order Block Trading Strategy
7 : Final Thoughts
What is ICT Order Block? ⚡️
ICT Order block is the area in the price chart, where a large number of orders are executed by institutional traders in the market and market shows sudden strong move from that area.
Retail traders follow institutional foot prints, so they wait for these order block zones to buy or sell in the market & make profit along with big institutions like banks.
You can see the example of order blocks in the picture given below :
Types of Order Block
As you know market has two price moves bullish & bearish. So on the basis of price moves, order block is divided into two types.
(I) Bullish Order Block
(II) Bearish Order Block
Bullish Order Block
A bullish order block is the last bearish candle before the bullish impulse (strong sudden) move, it typically consist of two candles, with the first candlestick being a bearish and the second candlestick being a bullish one.
How to Identify a Bullish Order Block? ⚡️
To identify a valid bullish order block you need to check following things.
(I) Second candle being a bullish candle, should grab the low of previous bearish candle. Price should go below the low of previous bearish candle.
(II) Second candle being a Bullish candle should close above the high of previous bearish candle.
(III) Imbalance in lower time frame in the order block zone.
(IV) Structure shift in lower timeframe.
To sum it up we can say, second candle should completely engulf the first candle – body to body & wick to wick.
You can see the example of bullish order block in the picture below :
Bearish Order Block ⚡️
A bearish order block is the last bullish candle before the bearish impulse move, it typically consist of two candles, with the first candlestick being a bullish and the second candlestick being a bearish one.
How to Identify a Bearish Order Block? ⚡️
To identify a valid bearish order block you need to check following things.
(I) Second candle being a bearish candle, should grab the high of previous bullish candle. Price should go above the high of previous bearish candle.
(II) Second candle being a bearish candle should close below the low of previous bullish candle.
(III) Imbalance in lower timeframe in the order block zone.
(IV) ICT Market Structure Shift in lower timeframe.
To sum it up we can say second candle should completely engulf the first candle – body to body & wick to wick.
You can see the example of bearish order block in the picture below :
Bullish Order Block Trading Strategy ⚡️
In bullish order block trading strategy you would look for shift of price delivery from bearish to bullish and then execute a buy trade utilizing a bullish order block.
When the trend is bearish and it approaches a demand zone where you would seek reversal of price and at that area price shifts its structure to the buy-side.
Then you will be looking for the order block at the bottom of the impulse move which changed market trend.
When you find the bullish order block in that move, it means it was a move involving institutions so you need to wait for the price to test the bullish order block zone to execute a buy trade.
When price retraces back and tests the bullish order block zone you can execute a buy trade as shown in the picture below :
When tradin bullish Order block trading strategy your stop loss will be 10/20 pips below the low of order block zone.
Bearish Order Block Trading Strategy ⚡️
In bearish order block trading strategy you would be looking for the shift of trend from bullish to bearish and then execute a sell trade utilizing a bearish order block.
When market trend is bullish and it approaches a supply zone where you seek reversal of price and at that area price shifts its structure to the sell-side.
Then you would look for the order block at the bottom of the impulse move which changed price trend.
When you find a bearish order block in that move it means it was a move involving institutions so you need to wait for the price to test the bearish order block zone to execute a sell trade.
When price retrace back and tests the bearish order block zone you can execute a sell trade.
A real market example of bearish order block trading strategy is shown below in the picture.
Final Thoughts⚡️
When trading using bearish Order block trading strategy our stop loss will be 10/20 pips above the high of order block zone.
Order blocks can also be found in a trend after a pull back and these order blocks confirm the strength of trend. We can use these order blocks to trade the trend or to add new positions in the trend.
Like in a bearish trend after a bullish pullback a bearish order block may form, which confirms the strength of bearish trend and we can add a new sell order to enjoy the bearish trend.
Likewise in a bullish trend after a bearish pullback a bullish Order block may form which confirms the strength of bullish trend and we can add a new buy order to enjoy the bullish trend ❤️ .
