Order Block — Trading Wiki

What Order Block means

An order block is a price zone where institutional traders placed large orders, creating supply/demand imbalances. Identified as the last opposing candle before an impulsive move.

In depth

An order block is a concept from Smart Money Concepts (SMC) and Inner Circle Trader (ICT) methodology that identifies specific price zones on a chart where institutional traders have placed significant orders, creating measurable supply or demand imbalances. These zones represent areas where 'smart money' — banks, hedge funds, and large institutional players — have accumulated or distributed their positions. The identification of order blocks follows precise rules. A bullish order block is defined as the last bearish (red/down) candle before a strong impulsive bullish move that breaks market structure to the upside.

The entire range of that candle, from its open to its close (and sometimes including wicks), becomes a demand zone where institutions are believed to have placed unfilled buy orders. A bearish order block is the mirror: the last bullish (green/up) candle before a strong impulsive bearish move. The theoretical foundation rests on how institutional orders actually execute in the market. When a large institution wants to buy a significant position — say $500 million worth of a stock — they cannot execute the entire order at once without moving the market against themselves.

Instead, they break the order into smaller pieces and execute them over time, often during pullbacks. The order block represents the initial zone where they began accumulating, and because their order was too large to fill completely, unfilled orders remain at that level, creating a zone where price tends to react when it returns. Not all order blocks are created equal. High-quality order blocks are characterized by: (1) a strong impulsive move away from the block with multiple candles of continuation, (2) a break of prior structure (previous high or low), (3) the block has not been previously revisited (it is 'unmitigated'), and (4) it aligns with higher-timeframe trend direction.

Order blocks that have been revisited and held are considered 'mitigated' and lose their potency for future trades.

Key points

• Represents zones of institutional accumulation or distribution
• Bullish OB: last red candle before impulsive move up
• Price often revisits order blocks before continuing the trend

Practical tip

Focus on unmitigated order blocks that caused a break of structure. The first revisit has the highest probability of holding. Mark the 50% level of the OB candle — that's often where price reacts most precisely.

Why it matters when you are learning

Order blocks reveal where the 'smart money' is positioned. Trading from these zones aligns your entries with institutional flow.

Practising Order Block on the simulator

Reading about Order Block and using it are different skills. Try it once in the simulator on an instrument you already follow, write down beforehand what you expect to happen, and check the journal a day later to see whether it played out that way. Educational simulation only — not financial advice.