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How to Trade Order Blocks Like a PRO (Even With ZERO Experience) — Transcript

by Smart Risk · 2,860 words · 506 segments · language pt · Watch on YouTube

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0:00Hey traders, and welcome to another
0:01episode of Smart Risk.
0:04Most traders think that once they
0:05identify an order block, all they need
0:07to do is wait for price to return, enter
0:09a trade, and expect a reversal.
0:12But here's the problem. Not every order
0:14block is worth trading, and that's
0:16exactly why so many traders keep getting
0:18stopped out, even when their setups look
0:20perfect.
0:22In today's video, I'm going to show you
0:24how to identify high-quality order
0:25blocks, what separates the strongest
0:28ones from those that are likely to fail,
0:30and most importantly, how to use them to
0:32find high-probability trading
0:34opportunities.
0:35We'll also break down a powerful order
0:37block trading strategy, including the
0:39exact conditions, entry confirmations,
0:42and techniques I personally look for
0:44before taking a trade. So, make sure you
0:46watch until the end because I'll walk
0:48you through everything step-by-step and
0:50show you how to apply it on real charts.
0:52See you after the intro.
0:58>> [music]
1:03>> Welcome back, traders. So, let's get
1:06started.
1:07Before we get into the technical
1:08details, let's start with the basics.
1:11What exactly is an order block?
1:13In smart money trading, order blocks are
1:15often described as the footprints of
1:17institutional activity, areas where
1:19large players are believed to have built
1:21positions before a strong move.
1:24On the chart, we usually look for these
1:26zones near the origin of a powerful move
1:28that breaks market structure.
1:30Simply put, we're identifying the area
1:33price moved away from before breaking
1:34through a previous high or low.
1:37So, why does this matter? Because when
1:40price returns to that area, we can
1:42potentially see a strong reaction or
1:44even a reversal. But not every order
1:46block is worth trading. The context
1:48around it is what really matters, and
1:50that's exactly what we're going to break
1:52down in the next parts.
1:54But now, let's see how to identify order
1:56blocks using candlestick patterns.
1:58In a bearish scenario, a bearish order
2:01block is the last up-close candle or
2:03series of up-close candles formed right
2:06before a strong bearish move that leads
2:08to a break of structure.
2:10The exact opposite applies to a bullish
2:12order block.
2:14It's the last down-close candle or
2:16series of down-close candles formed
2:18right before a strong bullish move that
2:20breaks a structure.
2:22Now, here comes an important question.
2:25Are all order blocks worth trading?
2:27And should we consider every order block
2:29a potential reversal zone?
2:31The answer is absolutely not.
2:33In fact, this is one of the most common
2:35mistakes traders make. They identify
2:38every order block on the chart as a
2:39potential reversal area and try to trade
2:42all of them.
2:43But here's the thing.
2:44For an order block to be considered high
2:46quality and tradable, it needs to meet
2:48two sets of criteria.
2:50Specific characteristics of the order
2:52block itself and the right market
2:54conditions.
2:55So, let's start with the
2:56characteristics.
2:58The first important characteristic is
3:00that a high-quality order block should
3:01create a clear imbalance or fair value
3:04gap during the move away from the zone.
3:07As you probably know, price often
3:08returns to areas of inefficiency to
3:10rebalance them. And when an order block
3:12is followed by a strong displacement
3:14that leaves behind a fair value gap, it
3:17can make that area more interesting to
3:19watch when price eventually returns.
3:22The second characteristic is a liquidity
3:23sweep.
3:25Ideally, we want to see the order block
3:27candle sweep the high or low of the
3:28previous candle before price makes its
3:31strong expansion move.
3:33For example, in a bullish scenario, the
3:35order block candle takes out the
3:36previous candle's low before price
3:38aggressively pushes higher.
3:40The opposite applies to a bearish order
3:42block where the candle sweeps the
3:44previous candle's high before the
3:46bearish expansion begins.
3:48This liquidity grab can add another
3:50layer of confirmation to the setup.
3:53The third characteristic is that the
3:54move originating from the order block
3:56should lead to a clear break of
3:57structure or change of character.
4:00But, here's an important detail.
4:02We want to see a full candle body close
4:04beyond the previous major swing high or
4:07low, not just a temporary wick
4:09penetration.
4:10Why? Because a wick above a previous
4:13high or below a previous low can simply
4:15represent a liquidity sweep rather than
4:17a genuine structural break.
4:19So, if price only briefly breaks the
4:21level with a wick and immediately
4:22reverses, we shouldn't automatically
4:25consider that a confirmed break of
4:26structure.
4:28The fourth characteristic is having a
4:29clear higher time frame liquidity target
4:31in the direction of the expected move.
4:34This could be liquidity resting above
4:35equal highs or below equal lows,
4:38significant daily highs or lows, or
4:40important levels from previous trading
4:42sessions.
4:43And here's why this matters.
4:45A clear liquidity target gives price a
4:47logical destination and helps us
4:49determine whether there's enough room
4:51for the trade to develop.
4:53For example, imagine you've identified a
4:55bullish order block that meets all three
4:57previous criteria.
4:59But, just above your entry, there's a
5:00major resistance area or opposing
5:02liquidity zone that could limit the
5:04upside.
5:05Even though the order block looks
5:07technically perfect, the available
5:09reward might not justify the risk. And
5:11that's exactly why we need to evaluate
5:13the potential target before entering a
5:14trade.
5:16If there's no clear target with enough
5:18room for a reasonable risk to reward
5:20ratio,
5:21sometimes the best trade is no trade at
5:23all.
5:24Now, these four characteristics can help
5:26us separate stronger order blocks from
5:28weaker ones. But, here's something most
5:30traders overlook.
5:32Even an order block that meets all four
5:34criteria isn't necessarily worth
5:36trading.
5:37Because identifying a high-quality order
5:39block is only half the equation.
5:41The other half is understanding the
5:43market conditions in which that order
5:44block forms.
5:46And that's where our next set of filters
5:48comes in. These market conditions help
5:50us narrow down our setups even further
5:52and focus on the A+ trading
5:54opportunities we're actually looking
5:55for.
5:56But before we continue, if you're a
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6:42description.
6:44The first condition we want to see
6:46before trading an order block is higher
6:48time frame delivery.
6:50So, what exactly does that mean?
6:53Before considering an order block as a
6:54potential trading opportunity, we want
6:57to see price originate from a key higher
6:59time frame area of interest.
7:01This could be a supply or demand zone, a
7:04fair value gap, or a major liquidity
7:06level that price has just swept.
7:09Only after that do we start looking for
7:11an order block on a lower time frame.
7:14And here's why this matters. You can't
7:16just trade every order block that forms
7:18randomly on the chart.
7:20Without the right higher time frame
7:21context, an order block can simply act
7:24as an inducement or form during a
7:26temporary retracement before price
7:27continues in its original direction.
7:30Let me show you what I mean.
7:32Imagine price is moving in a clear
7:34bearish trend, but suddenly starts
7:36making a deeper retracement.
7:39During that pullback, price reacts
7:41briefly to a nearby supply zone, then
7:43pushes higher and breaks above a
7:44short-term structural high.
7:47And this is where many traders get
7:48trapped.
7:50They immediately label that break as a
7:51change of character, assume the bearish
7:54trend is over, and start looking for
7:56buying opportunities.
7:57They identify the newly formed bullish
7:59order block, enter a long position, and
8:02place their stop loss just below the
8:04zone.
8:05At first, everything looks promising.
8:08Price starts pushing higher,
8:10but shortly after, sellers regain
8:12control. Price breaks through the order
8:14block, and those early buyers get
8:16stopped out as the market continues in
8:18its original bearish direction.
8:20So, what went wrong? The order block
8:22formed without enough higher time frame
8:24context to support a bullish reversal.
8:27And that's exactly why higher time frame
8:29delivery should be one of the first
8:30things you check before considering an
8:32order block.
8:34Now, you might be wondering, which time
8:36frames should we use to identify these
8:38higher time frame areas?
8:40And should we use different time frames
8:41depending on the type of setup?
8:44Well, there are a few combinations I
8:46personally prefer.
8:48Let's start with supply and demand
8:50zones.
8:51If price taps into a key 4-hour supply
8:53or demand zone and shows a clear
8:55rejection,
8:56I usually zoom into the 15-minute chart
8:58and look for a high-quality order block
9:00that forms after that reaction.
9:03The same concept applies if price taps
9:05into the 1-hour time frame's order block
9:07and shows rejection.
9:09We can zoom into the 5-minute or even
9:11the 1-minute chart to look for a
9:13suitable lower time frame order block to
9:15open a position.
9:17But remember,
9:19simply touching a higher time frame zone
9:21doesn't automatically make every lower
9:22time frame order block valid.
9:25We still need the right price action and
9:27confirmation.
9:29Now, when it comes to liquidity sweeps,
9:31I mainly focus on two specific
9:34scenarios.
9:35The first is when price sweeps a major
9:37swing high or low on the 1-hour chart.
9:41Once that liquidity has been taken, I
9:43zoom into the 5-minute chart and look
9:45for a high-quality order block that
9:46forms right after the sweep.
9:49The second scenario involves the
9:50previous session's high or low on the
9:5315-minute time frame.
9:55When price sweeps one of these key
9:56liquidity levels, I move to the 5-minute
9:59or 1-minute chart and look for a
10:00high-quality order block or another
10:02suitable PD array that forms after the
10:05sweep.
10:06In both scenarios, the idea is the same.
10:09We first want to see price take
10:11liquidity from an important higher time
10:13frame or session level before looking
10:15for an entry on the lower time frame.
10:18But personally, I prefer using order
10:21blocks on higher time frames, such as
10:23the 15-minute chart or above, as key
10:26areas of interest where I expect price
10:28to react when it returns.
10:30I generally avoid using order blocks on
10:32very low time frames, like the 1-minute
10:34or 2-minute chart for direct trade
10:36entries.
10:38The second important condition for
10:39identifying a high-quality order block
10:41is liquidity.
10:43Before considering an order block for
10:44trading, we need to identify where
10:47liquidity is resting around it and
10:49whether price has already swept that
10:50liquidity.
10:52Liquidity refers to areas where large
10:54numbers of orders are likely to be
10:56concentrated, such as above equal highs
10:58or below equal lows.
11:00So, why does this matter?
11:02Let's say we've identified a bullish
11:04order block.
11:05Ideally, we want to see price sweep the
11:07sell-side liquidity resting below equal
11:09lows before reaching our order block.
11:12This can provide additional confirmation
11:14for a potential bullish reversal.
11:17But here's something important. If a key
11:19liquidity remains unswept beyond our
11:21order block, there's a possibility that
11:24price could break through the zone to
11:25reach that liquidity.
11:27That's why understanding where liquidity
11:29is located and whether it's already been
11:31taken can help us identify more
11:33promising order blocks and avoid weaker
11:35setups.
11:36However, a liquidity sweep alone doesn't
11:39guarantee a reversal.
11:41We still need the right market context
11:42and confirmation.
11:45Now that we've covered the
11:46characteristics and market conditions
11:48needed to identify a high-quality
11:50tradeable order block, it's time to put
11:52everything together.
11:53In this next section, I'm going to break
11:55down one of my favorite order block
11:57trading strategies designed to help us
11:59identify high-quality A+ trading
12:01opportunities.
12:03So, how does this setup actually work?
12:05In a bullish scenario, we're looking for
12:07price to sweep a key sell-side liquidity
12:09level, form a high-quality bullish order
12:12block, and eventually return to that
12:14zone.
12:15When price revisits the order block, we
12:18want to see a clear rejection that
12:19signals a potential bullish reversal.
12:22The exact opposite applies in a bearish
12:25scenario.
12:26It's not as simple as buying or selling
12:28every time price touches an order block.
12:31For this strategy to work effectively,
12:33several specific conditions need to line
12:34up. So, let's break down the entire
12:36process step by step and see exactly how
12:39to apply it on real charts.
12:43The first step is to identify a valid
12:44liquidity sweep on a higher time frame,
12:47preferably the 15-minute or 30-minute
12:49chart.
12:50Let's focus on a bearish scenario.
12:53We're looking for price to sweep a key
12:55buy-side liquidity level, such as a
12:57previous swing high or equal high, and
13:00then show a strong bearish reaction.
13:03Ideally, this rejection should lead to a
13:04clear break of structure or change of
13:06character, confirming that sellers are
13:08starting to take control.
13:11Once that happens, we identify the
13:13bearish order block associated with the
13:15liquidity sweep and the subsequent
13:17structural break.
13:19Now, before considering that order block
13:21as a potential trading opportunity, we
13:23need to make sure it meets the
13:24high-quality criteria we covered
13:26earlier.
13:28If everything lines up, that order block
13:30becomes our higher time frame area of
13:32interest, a zone where we'll be watching
13:35for a potential bearish reaction when
13:36price returns.
13:38But identifying the zone is only the
13:40first part of the setup.
13:42We still need a precise entry model.
13:45To execute this strategy, I prefer using
13:48two specific time frame combinations.
13:51The first is the 15-minute and 1-minute
13:53combination.
13:54The second approach is the 30-minute and
13:565-minute combination.
13:59Now, let's start with the 15-minute and
14:001-minute combination. Once the price
14:03returns to our high-quality bearish
14:05order block on the 15-minute chart, we
14:07zoom into the 1-minute chart.
14:09At this point, we're looking for a
14:10bullish fair value gap to be violated by
14:12a strong bearish move, turning it into a
14:15bearish inversion fair value gap.
14:18Once the inversion fair value gap forms,
14:20it can act as a new resistance zone,
14:22giving us a potential area to look for a
14:24short entry.
14:26And if we also get a market structure
14:27shift at the same time, that adds
14:29another layer of confirmation and makes
14:31the setup even more interesting.
14:33From there, we can look for price to
14:35retrace into the newly formed IFVG
14:38before potentially continuing lower
14:40toward the next sell-side liquidity
14:42level.
14:43Now, when it comes to entering a trade
14:45using this model, we have two different
14:46options.
14:48Option one is to enter immediately after
14:50the IFVG is confirmed, opening a short
14:53position at the next candle's open, and
14:55placing the stop loss just above the
14:57most recent swing high.
14:59Option two is to place a sell limit
15:01order at the lower boundary of the newly
15:03formed IFVG and wait for price to
15:06retrace into the zone to trigger our
15:07entry.
15:09The main difference is that the first
15:10approach allows us to enter without
15:12waiting for a pullback, while the second
15:14offers a potentially better entry price.
15:17Although, there's always a chance price
15:18won't retrace far enough to trigger our
15:20order.
15:22Now, what about our take profit target?
15:25There are a few different ways to
15:26approach this.
15:28For a more conservative target, we can
15:29aim for the nearest sell-side liquidity
15:31level on the 1-minute chart.
15:33But, if we're looking to capture a
15:35larger move, we can target a significant
15:37sell-side liquidity level on the
15:3915-minute or 30-minute chart.
15:42Another option is to use a fixed
15:44risk-to-reward ratio, such as 2.5 R or 3
15:47R, depending on your trading style and
15:50how much room price has to move.
15:52Now, if you prefer trading with the
15:5430-minute and 5-minute time frame
15:56combination, the approach is slightly
15:58different. Once price returns to our
16:00higher time frame order block, we zoom
16:02into the 5-minute chart and look for
16:04signs of a potential reversal.
16:06This could be a market structure shift
16:09or a clear change of character after
16:11price mitigates the higher time frame
16:13order block, giving us our first layer
16:15of confirmation that sellers may be
16:17taking control.
16:18Once that structural shift is confirmed,
16:21the next step is to identify a
16:22high-quality bearish order block
16:24responsible for the move.
16:26This is typically the last up-close
16:28candle or series of up-close candles
16:30formed right before the strong bearish
16:33displacement that caused the structural
16:34shift. Of course, we still want to make
16:37sure this order block meets the
16:38high-quality criteria we covered
16:40earlier.
16:41If everything lines up, we can place a
16:43sell limit order at the lower boundary
16:45of the newly formed bearish order block
16:47and wait for price to retrace into the
16:49zone to trigger our entry. That's it,
16:52traders. Thanks for watching. I hope you
16:54found this video valuable. If you did,
16:57hit subscribe and turn on notifications
16:59so you never miss an update. Drop a
17:01comment below with your thoughts or
17:03topics you'd like to see next. Your
17:05support means the world to us. See you
17:07in the next video.

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