What is an order block in forex?
There are two types of order blocks: A bearish order block is the last up candle that formed the highest high before the down move, and a bullish order block is the last down candle that formed the lowest low before the up move.
This video will help you understand exactly what is an order block in forex. The Content written in this blog is not included in this video therefore we recommend reading the blog after watching the video.
Validation of an order block?
A bullish order block is validated when the high of the lowest down candle (Bearish Candle) is engulfed by a later formed candle. A bearish Order Block is validated when the low of the highest-up candle (Bullish Candle) is engulfed by a later-formed candle.
How to trade order blocks
When price trades higher away from the bullish order block, creating a liquidity void and then later returns to the bullish order block thus closing the previously created liquidity void as price was trading away from the bullish order block; this will be bullish therefore we will anticipate buy setups in the market using the bullish order block as our entry-level.
When price trades lower away from the bearish order block, creating a liquidity void and then later returns to the bearish order block. thus closing the previously created liquidity void, as price was trading away from the bearish order block; this will be bearish, and we will anticipate sell setups in the market using the bearish order block as our entry level.
We place our stop loss at the low of a bullish order block. While in a bearish order block, our stop loss will be at least 5 pips away from the high of the bearish order block.
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Originally published at https://ghosttraders.co.za on April 23, 2021.