Due to the great popularity of the Smart Money Concept approach, traders around the world are learning how to identify Order Block in the best way possible. Although there are different variations of the approach, the logic remains the same - accurately identifying a large limit volume in order to get the best entry point and catch the movement of a major player.
I will show you, in my opinion, the most accurate practice for detecting Order Block, which in addition will increase the number of potential entries. It is different from the classic application. Check it out!
Defining Max and Min on the chart
No matter what asset you are trading and timeframe, any logic for finding OB starts with marking the lows and highs (MIN MAX).
This is necessary to:
In our example, we will be looking for an Order Block on USDJPY H1
Note:
There are so-called true Min and Max (signed in white on the chart). They determine the direction of the trend on this timeframe and the Order Block can be located in them.
But there are also local Min and Max (signed in orange color), which do NOT determine the direction of the trend on this timeframe, but they can also contain an Order Block.
Having determined the true Min and Max, it is not difficult to establish the trend direction by comparing the last 4 points of the true MIN MAX.
In our case, the trend is downward.
Looking for a Order Block by trend
OB should be searched at the last MAX (in case of selling) or MIN (in case of buying). It does not matter whether it is a local or a true MIN MAX, the most important thing is the most recent one. And here are the specific rules for this (for a bearish OB):
All conditions are met. Found order block for sale.
Oder Block activation and entry.
Once an Order Block is marked, it is not yet sufficient to find an entry. An important condition before entry is Activation of the block. This is how we make sure that a major player is really moving the price in the right direction. Activation is the breakdown of the block in the direction of the trade.
In our example, activation is a break of the lower boundary of the block.
Attention: if the block order breaks through in the opposite direction, it is considered broken and can no longer be used.
After activation, you should wait for the price to return to the block and open a trade there. It is ideal to put a limit order. Stop Loss will always be the upper boundary of the block, Take Profit can be taken variably, there are no rigid rules.
Strong blocks can give more than one reaction. Then you can try to enter the block again.
Conclusion
In this article, we have shown the author's variant of how to find a block order on the trend and showed an example of how to work it out. Such blocks are especially strong and give many good entries. Of course, finding a block order is an important part of the Smart Money concept, but there are many more tools that will help to clarify the entry and exit and make SMC as efficient as possible (e.g. liquidity). We will talk about them in other articles.
I will show you, in my opinion, the most accurate practice for detecting Order Block, which in addition will increase the number of potential entries. It is different from the classic application. Check it out!
Defining Max and Min on the chart
No matter what asset you are trading and timeframe, any logic for finding OB starts with marking the lows and highs (MIN MAX).
This is necessary to:
- Identifying the trend in whose direction we will be looking for the Order Block.
- Directly for the Order Block itself, as it will be located at one of the MIN or MAX.
In our example, we will be looking for an Order Block on USDJPY H1
Note:
There are so-called true Min and Max (signed in white on the chart). They determine the direction of the trend on this timeframe and the Order Block can be located in them.
But there are also local Min and Max (signed in orange color), which do NOT determine the direction of the trend on this timeframe, but they can also contain an Order Block.
Having determined the true Min and Max, it is not difficult to establish the trend direction by comparing the last 4 points of the true MIN MAX.
In our case, the trend is downward.
Looking for a Order Block by trend
- Find the most recent MAX
- Find the last green candle before the MAX
- MAX point should be a false breakout of this green candle
- Draw the boundaries of this green candle - they will be the order block
Oder Block activation and entry.
In our example, activation is a break of the lower boundary of the block.
Attention: if the block order breaks through in the opposite direction, it is considered broken and can no longer be used.
After activation, you should wait for the price to return to the block and open a trade there. It is ideal to put a limit order. Stop Loss will always be the upper boundary of the block, Take Profit can be taken variably, there are no rigid rules.
Strong blocks can give more than one reaction. Then you can try to enter the block again.
Conclusion
In this article, we have shown the author's variant of how to find a block order on the trend and showed an example of how to work it out. Such blocks are especially strong and give many good entries. Of course, finding a block order is an important part of the Smart Money concept, but there are many more tools that will help to clarify the entry and exit and make SMC as efficient as possible (e.g. liquidity). We will talk about them in other articles.