Crypto Lexicon
Order Blocks
An Order Block (OB) is the specific candlestick price range where institutional market participants placed large accumulation or distribution orders prior to an aggressive market breakout.
The Mechanics of an Order Block
Institutions and large funds cannot enter multi million dollar positions in a single trade without causing massive slippage. To build positions, they absorb liquidity before releasing price in their intended direction.
Bullish vs Bearish Order Blocks
- Bullish Order Block: The final down candle (or series of down candles) immediately preceding a violent upward impulse that breaks previous market structure.
- Bearish Order Block: The final up candle immediately preceding an aggressive downward move that breaks lower market structure.
Why Price Retests Order Blocks
When smart money enters large orders, not all resting volume gets filled during the initial move.
- Mitigation: Institutions often allow price to pull back to their original entry level to close remaining breakeven positions or fill remaining buy orders.
- High Probability Reaction: The open, high, or 50 percent midpoint (Mean Threshold) of the Order Block acts as strong institutional support or resistance.
How to Trade Order Blocks Safely
- Confirm that the Order Block caused a genuine Break of Structure (BOS).
- Ensure there is an unfilled Fair Value Gap sitting adjacent to the Order Block.
- Place your stop loss safely beyond the high or low of the Order Block candle.
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Knowledge check
Three quick questions on this entry. Pick an answer to see whether it is right.
Question 1 of 3Which description matches Order Blocks?
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