Order Blocks Simplified - ICT Concepts

Step-by-Step Tutorial: Understanding Order Blocks Simplified

1. Understanding Order Blocks:

   • Order blocks are important levels in trading that indicate Smart money reversal.
   • They are formed when price sweeps liquidity on one side (buy or sell) and then displaces and closes above or below the opening price of a series of candles at an important level.

2. Identifying Order Blocks:

   • Look for buy-side liquidity or sell-side liquidity being created at important levels.
   • Validate an order block by observing price displacing and closing above or below the opening price of the relevant candles.
   • Use order blocks as either support or resistance for price movement.

3. Mean Threshold of an Order Block:

   • The mean threshold is marked at 50% of the body range of an order block.
   • Ideally, price should respect the 50% level to confirm the validity of the order block.

4. Order Blocks on the Buy Side and Sell Side:

   • On the buy side, look for order blocks after a Smart money reversal or in a trend continuation.
   • For a valid order block, observe a close above the series of down candles.
   • On the sell side, look for order blocks after a bearish phase or in a trend continuation.
   • Validate the order block by closing above the series of up candles.

5. Setting Stop Loss with Order Blocks:

   • Consider placing stop losses at the other end of the order block for better risk to reward ratio.
   • Be cautious of price wicking the stop loss, especially when it's at the other end of the order block.

6. Implementing Trading Strategies:

   • Look for entry points on retests of order blocks with appropriate stop-loss placements.
   • Consider using the mean threshold as an entry point for improved risk to reward ratios.
   • Adapt your trading strategy based on the market conditions and the formation of order blocks.

7. Practice and Analysis:

   • Practice identifying order blocks and understanding their significance in different market scenarios.
   • Analyze past trades to learn from successes and failures in utilizing order blocks effectively.

8. Continued Learning:

   • Consider exploring concepts like mitigation breaker and propulsion blocks to enhance your understanding of advanced trading strategies.

By following these steps and continuously refining your trading skills, you can effectively incorporate order blocks into your trading strategy and make informed decisions in the financial markets.