Let’s try and zoom out in order to understand the bigger picture on orderblocks.

From our lessons this

week, we said that with our strategy, the safest point of interest to use for entries is an order block. So,
what’s an order block?

An order block can be defined with respect to the trend that the market is displaying within a given
timeframe. In a bullish market, an order block is the last bearish candle that is formed before a break in
market structure(BMS) or a change of character(ChoCh). Let’s discuss the definition first before we get
lost in the generalization.

By saying the last bearish candle, an assumption is made that the last candle is the one that is formed
BEFORE the beginning of the move that will lead to the BMS or ChoCh. By saying that, we have
specifically been able to place that candle in the most discounted price; meaning the lowest price
possible.

In this write-up, I won’t focus on the bearish order blocks because once you understand the bullish
ORDERBLOCK, then you won’t have problems in spotting the bearish ones because they are complete
opposites of each other.

At this point, I would like to use an example from the market in order to illustrate this visually.

In this example, the market was in a downtrend. However there was a change of character to the upside
and thus we anticipate that there has been a change from a downtrend to an uptrend. So, in order for us
to go long on XAUUSD, we have to identify our point of interest where we’ll be able to take an entry
from. In our case, we’ll look for a bullish ORDERBLOCK.

I want you to understand how we get to mark the ORDERBLOCK. To do so, we’ll go back to our definition
of a bullish ORDERBLOCK. You remember it? The last bearish candle before the beginning of a move that
leads to a BMS or ChoCh. Nice. There it is, the bullish ORDERBLOCK, indicated by the grey -filled
rectangle.

Once you mark your ORDERBLOCK, what’s left is waiting for price to come back to your zone, and if it
does so, you monitor the reaction in the zone and if it respects the zone, you place your buy position.
Here are more examples;