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Market Mechanics Ep 10: Order Blocks — Transcript

by Brad Goh (The Trading Geek) · 7,643 words · 1,219 segments · language en · Watch on YouTube

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0:00If you want to trade like big banks, you
0:03have to know their intention.
0:05You have to be able to spot their
0:07footprints.
0:09Just like elephants, smart money tend to
0:12leave their footprints in the jungle of
0:14the market. And order blocks is that. An
0:18order block is basically a clue. A clue
0:21that large order flow has entered into
0:23the market causing displacement and left
0:27behind an area which may later respect.
0:30And if you know how to identify the
0:32right order blocks, they can become some
0:34of the most cleanest areas you have on
0:36the chart. Quite simply put, you will be
0:38able to know when's the next time the
0:41smart money is stepping into the market
0:42again causing price to move up or down
0:45very aggressively and you will be able
0:47to capture that huge imbalance move
0:50because when you are trading at an order
0:52block, a valid order block, you're
0:54essentially positioning yourself to be
0:57able to capture that huge move.
0:59You're able to be there at the right
1:02place at the right time to capitalize on
1:05the luck. Okay, so when you guys see me
1:07catch sniper entries, it's not because I
1:10got lucky. It's because I position
1:13myself at the right place to capitalize
1:17on the luck.
1:18Get it? Right, luck is equal preparation
1:21meets opportunity. And this is where you
1:24are able to do your preparation by
1:26identifying these order blocks. So, in
1:29this lesson, I want to break down order
1:30blocks.
1:32Order blocks is such a
1:34important concept but like it's also one
1:36of those very misunderstood concepts in
1:39trading.
1:40So, if you can understand how to
1:42identify them properly, they can give
1:44you very precise areas of interest for
1:47entries, reactions, and continuations.
1:53So, what is an order block?
1:56Order Order block, to put it in English,
1:58it's basically an area where large
2:02number of buy or sell orders are
2:05executed.
2:06So, it's like supply and demand zones,
2:09but like an overpowered version of
2:10supply and demand zones.
2:13So, for example, if there's a bullish
2:14auto block just like this, this tell us
2:16that at this price point, there was a
2:19lot of buy orders that was executed.
2:22There was a bulk of buy orders that was
2:25executed by the smart money, by the big
2:28banks. And this means that
2:30price is most likely going to gravitate
2:32towards that area for the big banks to
2:35fill up the remaining orders before
2:37price continue going up. Once again,
2:40tying to the concept of imbalance to
2:42balance to imbalance to balance.
2:45An auto block is basically the origin
2:47point of the imbalance.
2:50So, we have talked about this a lot in
2:51the past few lessons, right? The concept
2:53of imbalance, the concept of
2:54inefficiency, the concept of fair value
2:56gap. And we also discuss how the market
2:59move from phases of imbalance to balance
3:01to imbalance to balance.
3:03Now, auto block, what it does is that it
3:05allows you to know where is the starting
3:08point of the imbalance move.
3:09>> [snorts]
3:09>> So, you can expect price to come back to
3:12the starting point
3:14before continue going up. And that's
3:16where you want to get in usually, right?
3:19Right before price move to the upside.
3:23So, let's break it down step by step. In
3:26a bullish scenario just like this,
3:29it is often the last bearish candlestick
3:32before the expansion to the upside.
3:35And then in a bearish scenario just like
3:38this, it's usually the last bullish
3:39candlestick before price move very
3:42aggressively to the downside.
3:46So, I personally, I don't really care
3:48about whether this is a bullish candle
3:50or a bearish candle, even though that's
3:51what like textbooks tell me to do so.
3:54I just want to find a candlestick that
3:56is right before the imbalance move. The
3:59candlestick that is right before the
4:02huge move to the downside or to the
4:03upside.
4:04Yeah, so to keep things very simple,
4:07it's basically the last candle before
4:09the strong impulsive move that causes
4:12displacement and later on led to a break
4:15of structure.
4:18So,
4:19the reason why an order block is
4:21meaningful is not because it is the last
4:23opposing candle that led to the
4:25imbalance move.
4:26It is meaningful because of what happens
4:30right after it. Okay, you can see it
4:32right after it, it creates what? A
4:34imbalance. So, this is something that we
4:36talked about in the previous lesson,
4:38which is also known as your fair value
4:39gap, which tell us that
4:41the price has moved up so aggressively,
4:44so fast, so far that it has no choice
4:48but to leave a gap behind.
4:51Telling us that at some point of time in
4:52the future, the price is going to come
4:53back to fill up this imbalance before
4:55moving up even further. So, later we're
4:58going to talk about how to combine the
4:59fair value gap plus order block to
5:02create like a very formidable trading
5:05strategy. But for now, you can start to
5:07see like, you know, they are
5:09coming together like different pieces of
5:10the puzzle itself.
5:13Once again, I want you guys to
5:14understand the logic behind order
5:15blocks. Don't just memorize this stuff.
5:18Understand the logic behind order
5:19blocks.
5:21An order block is pretty much the area
5:24where smart money has entered in the
5:26past and it's most likely going to enter
5:30again.
5:31Okay, so it's the area where you can
5:33spot the smart money footprints.
5:35Like that is basically them telling you,
5:37"Hey, I just entered for a billion
5:39dollars worth of buy orders here." So,
5:41the next time price comes back to this
5:42price point again, I'm going to enter
5:44for another billion dollars worth of buy
5:46orders causing price to go up.
5:49Obviously, like that's
5:50not what they would say. That's not the
5:52exact words, but you get my point,
5:53right? It's basically the area where
5:56institutions are very, very interested
5:58in.
5:59So, how you identify order blocks is by
6:03using these steps right here. Just a few
6:05steps.
6:07So, first thing, if you look at a
6:08bullish scenario,
6:10you must understand that the reversal
6:12candle or the pivot candle that
6:16happened before the imbalance move, it
6:18must take out the previous candlestick
6:19low.
6:21So, once again, this is just a
6:22mechanical rule you can put in your
6:24system to ensure that you're identifying
6:26the valid order blocks.
6:28So, as much as possible, we want the
6:30pivot candle, the reversal candle to
6:33take out the previous candlestick low.
6:35So, in this case, you can see this
6:37candle took out the previous candlestick
6:39low, which is situated right here.
6:42And then, the next thing we want to see
6:44is some form of gap or balance being
6:46created because this signals
6:49institutional intent. This literally
6:52tell us that smart money has entered for
6:54a bulk, a large amount of buy orders at
6:57this price point. That's what created
6:59this imbalance, right? So, that is the
7:00footprint that they have left behind.
7:03And then, we need to have a sharp and
7:04substantial upward movement. It cannot
7:07be slow. It cannot be a little bit. It
7:09needs to be sharp. It needs to be
7:11substantial. It needs to be super duper
7:13obvious.
7:14Ideally, we have like a V-shape reaction
7:16just like this.
7:19And then, after that is formed, this is
7:21where we can identify the pivot candle
7:24that led to the imbalance. And that is
7:26where you can draw your order block,
7:28right? You just mark up the high and the
7:30low of the candle, the origin candle,
7:33the pivot candle, the reversal candle
7:36before the imbalance move, just like
7:38this. And then, we have your order
7:39block.
7:41So, yeah. Order block is formed at the
7:43last bearish candle before a sharp
7:45upward movement.
7:47So, in this case, we are expecting price
7:49to pull back to the order block,
7:51mitigate the remaining uh mitigate this
7:53zone right here, fill up the remaining
7:54buy orders before price continue back
7:57bullish.
7:58So, in a bearish scenario, it's the
7:59exact same thing but in the opposite.
8:01Right? This time the pivot candle must
8:03take out the previous candlestick high.
8:06Okay, so in this case,
8:07this candle, the reversal candle, must
8:10be above the previous candlestick high
8:12for us to actually draw order block.
8:15And then, once again, must create an
8:17imbalance to the downside like a bearish
8:19fair value gap, just like this.
8:21Okay? Fair value gap must be present in
8:23order for us to identify order block. No
8:26imbalance, no fair value gap, no
8:27inefficiency, no fair value gap. As
8:30simple as that.
8:31And then it leads to a sharp and
8:33substantial downward movement, and then
8:35we can expect price to pull back to this
8:37bearish order block for price to
8:38continue
8:40down even further.
8:43Now, a question that you might have
8:46right now is, "Cool, Brett. Like, this
8:48all sounds interesting and easy to
8:50understand, but what's the difference
8:52between order block and supply and
8:54demand zones?"
8:56To be honest, it's the same thing. Okay?
8:58Order blocks and institutional supply
9:00and demand zones, they are pretty much
9:01the same thing.
9:02Just two differences.
9:05Number one is order blocks are much more
9:06effective than supply and demand zone.
9:09For supply and demand zone, we are
9:10pretty much looking for the areas, the
9:13point of interest, that led to the
9:15aggressive move either to the upside or
9:17to the downside.
9:19So, it doesn't matter whether there's
9:20imbalance or not. As long as there's
9:22aggressive move, you can draw a supply
9:24and demand zone there. But for order
9:26block, one of the very strict criteria
9:29for it to be valid, for it to count as a
9:32order block, is that it needs to have a
9:34imbalance. Okay? So, that's like the
9:36prerequisite for a valid order block. It
9:39needs to have that imbalance. And that
9:41imbalance basically tell us that smart
9:43money has entered at this price point,
9:45thereby
9:47making the order blocks much more
9:49effective than supply and demand zones.
9:52And also different rules are used when
9:54identifying valid order blocks. Right,
9:56so only order blocks have all of these
9:57like weird little rules that is
9:58surrounding them.
10:00Yeah, but for supply and demand zone is
10:01a complete set of rule and it's much
10:02more simpler to identify them.
10:05So yeah, that's just my two cents. I
10:07believe that it's pretty much the same
10:08thing.
10:10Obviously,
10:11it's not as simple as, "Okay, an order
10:13block is going to be much more higher
10:15probability than a supply zone."
10:18An order block
10:20is much more stronger than a demand
10:22zone. Price will definitely respect the
10:23order block. No, that's not true. Right?
10:26Like I said, this is just like a general
10:29rule for you to follow.
10:31It still depends on the context of the
10:33market. I've seen situations where a
10:35supply and demand zone is much more
10:37stronger than an order block. Like an
10:39order block can be present right here,
10:40but price can still blast right through
10:42the order block and go to the supply and
10:44demand zone because of the fact that
10:47that supply and demand zone is much more
10:49higher probability because there's more
10:51confluences surrounding that supply and
10:53demand zone. Therefore, price moved
10:55towards that instead and respected that
10:57before going down.
10:59Yeah, so I've seen instances where that
11:01happens. So just use this as like a
11:03reference. Don't treat this as like a
11:05source of truth. I will always advise
11:08you to like test this out based on
11:10um data and then based on your own
11:12experience, you can come to your own
11:14conclusion, right? Whether which one is
11:15like more effective for you.
11:19So with that being said, let's try to go
11:22to the charts right now
11:24and apply what we have just learned
11:26about order block.
11:28Speaking of that, one more thing I
11:29forgot to mention.
11:31But if you guys notice
11:33for drawing our supply and demand zones,
11:35there was your range method and then
11:36there's a pivot method. The range method
11:38requires you to mark up the entire
11:39consolidation. The pivot method requires
11:42you to mark up only the pivot candle
11:44right here.
11:46Now, what are we doing when we trade
11:47order blocks? We are identifying the
11:50pivot candle that led to the aggressive
11:52move.
11:54Right? So,
11:55supply and demand zones, if you're
11:56drawing it via the range method, it's
11:58going to be usually much more wider than
12:01order blocks itself. Order blocks is
12:03usually much more refined because we are
12:04always using the pivot method.
12:09All right. So, with that being said,
12:10let's go to the charts and try to
12:12identify some good old order blocks.
12:16So, let me just go to like a random
12:17point in time. Let's look at like this
12:19one's right here. Okay? So, first of
12:21all,
12:22step one, identify the imbalance,
12:25identify the fair value gap. Where did
12:27price move down or up very aggressively?
12:30Where did price leave a gap, right? That
12:32signaled to us that, you know, smart
12:34money has entered into the market.
12:36Right? Just by looking at this price
12:39action alone, I can see that very
12:41aggressive move to the downside right
12:42here.
12:43This is very obvious, very aggressive.
12:46Now, this
12:48Is this an imbalance, right? That's what
12:49you want to ask yourself. Because like I
12:50said, one of the prerequisite of an
12:52order block is that it needs to have
12:54some form of imbalance.
12:56Even if there's like very aggressive
12:57move to the downside just like this, but
12:59if there is no imbalance whatsoever, you
13:01cannot find your order block.
13:04Okay, so in this case, was there
13:05imbalance right here? Yes, there is,
13:07right? Because this huge candlestick
13:09right here,
13:11if you look at the previous low of the
13:14previous candlestick and the high of the
13:16next candlestick right here, it give
13:18like a little gap just like this, giving
13:20us our fair value gap. Okay, so this
13:23becomes our fair value gap.
13:25And we also know that
13:28the order block is basically
13:31the origin point of the fair value gap.
13:34It's the origin point of the imbalance,
13:36right? So, what we want to do is to find
13:38the last candle before the sharp
13:40downward movement.
13:43So, ideally it should be like a last
13:45bullish candle before price move to the
13:46downside.
13:48So, in this case,
13:49this right here is the last bullish
13:52candle before price move very
13:53aggressively to the downside, therefore
13:56forming our order block.
13:59Okay, so in this case, you can see look
14:02at what happens in the next candle,
14:04right? So, what happens that after this
14:06order block was formed, next candle
14:08prices blast right through it and then
14:09came all the way down here. So, for me
14:12personally
14:13I would not really like to mark my order
14:16block just like this because you can see
14:18in the next candle prices really blast
14:19right through it. So,
14:21that's not really an order block anymore
14:23since price is really blast right
14:24through it and use they will use the
14:27orders that we have within this zone
14:28itself.
14:29So, in this instance, what I would do is
14:31that I would change the order block
14:33location to the next candlestick, which
14:35is this one right here and drag it from
14:37the high to the low of this pivot candle
14:39itself.
14:41Okay, so
14:42this is just how I personally map order
14:44block because I want it to be
14:46unmitigated as much as possible so that
14:49later on when price comes up mitigated,
14:51I can look for shorts and just trade it
14:53all the way to the downside. But in this
14:56case, if I marked it up at this previous
14:58bullish candlestick
15:00just following this rule blindly, which
15:02says that you should mark up the
15:05last bullish candlestick before the
15:06sharp downward movement
15:08like it just doesn't make sense to me
15:10anymore, right? Because price is
15:11literally blast right through it
15:13multiple times, wick up, wick down and
15:15then start going down. So, you're much
15:17better off just, you know, marking up at
15:20like the last candlestick before this
15:22sharp downward movement instead.
15:24So, that's a bearish order block. Let's
15:26try to identify another one.
15:28Another one that looks very obvious is
15:29probably this one right here. You can
15:31see just by using [snorts] your bare
15:33eyes alone, you should be able to just
15:35find order blocks very easily. As long
15:37as there's like an imbalance present,
15:39like in this case imbalance right here,
15:41boom, order block right there.
15:44Okay, so
15:45yeah, you want to mark up the pivot
15:47candle.
15:48So, for me personally, I don't really
15:49care whether the uh pivot candle is
15:51bearish or bullish. I just want to mark
15:54up the candle that is right before the
15:57imbalance itself, right? So, in this
15:58case, this is the imbalance. This is the
16:00origin point. This is what led to this
16:03sharp move to the downside.
16:06And then let's do another one like maybe
16:08let me try say
16:11this one right here. Okay, so this one
16:13right here is very obvious. Price moved
16:15very aggressively to the upside.
16:17Imbalance, more strong displacement.
16:20Now, order block will be the pivot
16:21candle
16:23that led to this move to the upside. So,
16:25that is my pivot candle, and this is my
16:27order block.
16:29So, in this case, if I were to draw a
16:31demand zone using the range method, I'll
16:33mark up this entire consolidation. So,
16:35this will become my demand zone.
16:38And then if I were to draw this demand
16:40zone using the pivot method, which is
16:42just refining it to the candlestick that
16:44caused the reversal, I'll mark it up to
16:46this candle right here.
16:48So, you can see if I use the pivot
16:50method
16:52when trying to identify supply and
16:53demand zone,
16:55sometimes it could be the same zone as
16:58the order block itself, like in this
17:00case right here.
17:02Another example, right? Price moved very
17:04aggressively to the upside. But in this
17:06case, there is no imbalance whatsoever.
17:09So, this is actually a pretty good
17:10example.
17:11Right? So, in this case, this
17:13candlestick
17:14closed at This is the highest point of
17:16this kind of stick. The next kind of
17:17stick in balance, right? A lot of big
17:21bullish momentum right here, but there
17:22was no imbalance because if you look at
17:24the next kind of stick, the low of the
17:25next kind of stick was somewhere around
17:27here, right? So, there was no gap
17:29whatsoever. There's no imbalance
17:30whatsoever. So, I cannot just blindly
17:33put this as my auto block over here.
17:35Okay? So, this is not a auto block
17:38because there is no gap, because there
17:40is no imbalance.
17:41However, because there was aggressive
17:44buying pressure, because there was a lot
17:46amount of buying momentum right here, we
17:48can still deem this as a demand zone.
17:51Okay? So, that's why it's so important
17:54for you guys to understand the rules
17:55that govern
17:57the identification of like each one of
17:59these zones. Because when you do, you
18:00will be able to discern whether it's a
18:01auto block or a supply and demand zone.
18:03So,
18:05prerequisite of auto block is that it
18:07needs to have the gap or imbalance
18:08created. No gap, no imbalance, no auto
18:11block, as simple as that. So, in this
18:13case, even though we got a such a short
18:14move to the upside,
18:16because of the fact that there was no
18:18imbalance being created right here,
18:20there is no auto block.
18:23Okay? So, later on, price just continued
18:24going up and up and up, and then next
18:26time, price started pulling back right
18:28here. When price started pulling back
18:30right here, huge imbalance to the
18:31upside, right? We can identify imbalance
18:34right here. And then the auto block
18:36would be the origin candle, which would
18:38be this one right here. Okay? So, this
18:41is the pivot candle that caused price to
18:42start shifting bullish.
18:46So, in this instance right here, this is
18:49the pivot candle, but you can also place
18:50it at like the previous kind of stick
18:52that caused the imbalance move just like
18:54this. I will say once again, I'll leave
18:56it up to you guys on how you want to map
18:57out. Uh this is this could requires a
19:00lot of a little bit of discretion, and
19:02my advice advice is always like just go
19:04and test it out based on data. Right?
19:06Based on data, you might realize that
19:07price tends to pull back to the auto
19:09block that was created by like the
19:11reversal candle, the pivot candle,
19:13rather than the candle that comes before
19:15the imbalance itself. And if that's the
19:17case, you might want to stick to that
19:18method of identifying your order blocks.
19:22So, let me talk about some common
19:23mistakes that traders tend to make while
19:26they are using order blocks.
19:29Number one is that they ignore the
19:32displacement, right? So, what I mean by
19:34that is that they see price moving very
19:37aggressively to the downside just like
19:39this, and they immediately assume that
19:41there's an order block somewhere around
19:42here.
19:43When in reality, there is no imbalance
19:45right here. If there's no imbalance,
19:46like I said, it's not an order block. It
19:48is just an ordinary supply zone.
19:52Another mistake is that they ignore
19:53structure.
19:55Remember, in order for this order block
19:57to be strong, it needs to break
20:00structure.
20:02All right. So, where did I mention that
20:03actually? I think I mentioned it
20:05somewhere.
20:07Okay, when I'm speaking. Okay, so I do
20:09need I want to see this break structure,
20:12right? So, in this case, you can see
20:14let's look at this example right here.
20:16This order block, what happens is that
20:18after the order block was formed, price
20:20actually went up there and take out the
20:21last swing high, giving us a bullish
20:23break of structure.
20:25Now, why do we want to see an order
20:27block lead to a break of structure?
20:29Because when that happens, that tells us
20:31that
20:32there was indeed a lot of institutional
20:34buying volume,
20:36so much that it causes price to take out
20:38the last week high.
20:40Okay? Because like I said, it requires a
20:42lot a lot a lot of money to cause the
20:44market to actually take out a particular
20:46high or a particular low.
20:49Another thing is that people tend to
20:52take the order blocks in the wrong part
20:54of the premium and discount range,
20:57right? So, for example, what happens is
20:59that
21:01let's say like looking at this example
21:03right here.
21:05Let's say this is our swing low and our
21:07swing high and I'll mark my premium
21:08discount up just like this. And then
21:11this is where I can identify like an
21:13order block right here and then I could
21:15potentially identify another order block
21:17like somewhere right around here.
21:19And then let's say, okay, once again,
21:21this is just an example. Let's say we
21:23got another order block like somewhere
21:24around here because because there was
21:26like a pullback over here.
21:28So let's say there's another
21:29order block right here.
21:31In this case, there is three order
21:32blocks.
21:34One of them is within the premium
21:35pricing
21:37and two of them is within the discount
21:39pricing. Ideally, if you are looking for
21:41longs, you want to wait for price to
21:43come down to the order block that is
21:45within the discount range.
21:47So if price comes down to this order
21:49block that's within the premium pricing,
21:51it's still a little bit to enter for
21:53longs. It's still a little bit early to
21:55enter for longs because this could just
21:57be price, you know, pulling back.
22:00It's going to have more room for it to
22:01drop before it can continue going up.
22:06So you want to make sure that just like
22:08supply and demand zones, you want to
22:09make sure that you are using them at the
22:11right place at the right time.
22:16Now, another
22:18minor mistake that people tend to make
22:20could potentially be trading them
22:22blindly without confirmation. Right? So
22:25a lot of times what tends to happen is
22:26that people they see that price comes
22:28down and they mitigate order block and
22:30they immediately enter for a buy just
22:32like this. And then next thing you know,
22:35price just blasts right through the
22:35order block. Once again, I can't
22:38emphasize this enough, but if you need
22:40multiple confluences before you look for
22:42entry.
22:44You need multiple evidence, right? To
22:47prove that your trade idea is indeed
22:49valid before you can actually execute
22:51it.
22:53So yeah,
22:54that's something that I've talked about
22:56a lot a lot throughout this entire
22:57membership, so I don't really want to
22:59keep nagging you guys, but like that's
23:01something that you need to understand,
23:03right? Because I really believe that
23:04people don't need to be taught, they
23:06need to be reminded.
23:08So, don't just trade one particular
23:10concept alone by itself. Like, don't
23:12just buy a bullish fair value gap. Don't
23:15just, you know, like buy a bullish order
23:17blocks. You want to use multiple
23:19confluences.
23:21And speaking of fair value gap, maybe I
23:23can try to show you guys how we can
23:25combine the fair value gap concept with
23:28the order block concept. Okay, so let's
23:30use this example right here.
23:34Or maybe like this one right here. Okay,
23:35so in this case, price is pulling back
23:37over here. Now, where is price going to
23:39pull back? Well, price is first going to
23:41pull back to the imbalance, to the fair
23:43value gap
23:45before it move up even higher, right?
23:47So, that's going to be like the first
23:49place where price is moving towards
23:51next. So, if I'm looking at this diagram
23:53over here, this chart over here,
23:55I can see that there was a fair value
23:56gap right here, right?
23:58That's what allowed me to actually
24:00identify this order block right here,
24:02because I spotted this fair value gap, I
24:04spotted this imbalance.
24:06And that's what allowed me to know that,
24:09okay, this is the origin candle and this
24:10is where the order block is formed.
24:12So, in this case right here, I'm
24:14expecting price to pull back to this
24:18imbalance right here, fill up the
24:19imbalance before going up even further.
24:23Because if you look at this move right
24:24here, it was so overextended. Price went
24:27up very aggressively, make a minor pull
24:29back, goes up, comes down, goes up very
24:31aggressively again, and then right now
24:34we can expect it to make a deeper pull
24:36back, fill up the imbalance before going
24:38up even further.
24:40Right, so in this case, how you could
24:42potentially trade it is that once price
24:44enter the
24:46fair value gap, you can look for your
24:48entry. And if you don't find your entry
24:50within the fair value gap itself, you
24:52can wait for price to come down even
24:55lower to the order block, then you look
24:57for entry.
24:59Yeah, so that's how you can go about
25:01like combining fair value gap and order
25:03block. Just know that the first place
25:06where price is gravitating towards next
25:08is going to be the fair value gap. And
25:10then after that, then it could
25:11potentially move to the order block.
25:13So, if you don't get your entry over
25:15here, don't worry, right? It's just
25:17price needing more liquidity, so it's
25:19going to come back down to the order
25:20block, right? It needs more fuel. So,
25:22when price does come back down to the
25:24order block, then this is where you can
25:25look for your entry.
25:36All right, so with that being said, let
25:38me just go through more example with you
25:40guys just to really like
25:43ensure that you wrap your head around
25:44this concept.
25:46Uh let's let's just go through like
25:48maybe these ones right here.
25:51So, in this case over here,
25:55yeah, maybe I show you this one right
25:56here. All right, so in this case,
25:59what do we have? We got price moving
26:01very aggressively to the downside.
26:05Okay, did it just freeze on me?
26:08Okay, I'm not sure what just happened,
26:09but like I think the chart just froze.
26:12Is this where we are now? Let me just
26:14remove everything. This is so
26:16clouded. Let me just
26:18Yeah, let's just let's just go here,
26:19right? Don't freeze on me again,
26:21TradingView. All right, so in this case,
26:24price move very aggressively to the
26:25downside. So, this is where we can see
26:28huge imbalance to the downside, right?
26:30Imbalance means what? Means that
26:32somewhere around here, there's an order
26:33block, okay? So, first step is to go and
26:36look for the strong displacement, look
26:37for the imbalance.
26:39So, in this case, imbalance to the
26:41downside. Well, why is there an
26:43imbalance? Right? Because I I I can see
26:45that there's a gap, right? There's a
26:46very nice
26:48gap right there.
26:49I almost said cameltoe, but like there's
26:51a very nice gap right there.
26:53So,
26:54the reason why is because this is the
26:55next candlestick, and this is the high
26:57of the next candlestick, and then this
26:59is the low of the previous candlestick,
27:01and you can see with that we got a
27:03good old juicy imbalance, or fair value
27:06gap, or inefficiency. Okay? So many
27:09different names for this thing, right?
27:11But, that's the imbalance right there.
27:13And our next step as order block traders
27:15is to find the origin point of the
27:17imbalance by looking for the pivot
27:20candle that led to the imbalance itself.
27:23So, in this case,
27:25this becomes the pivot candle, right?
27:29If you were to draw it at the last
27:31bullish candlestick, which is this one
27:33right here, look at what would happen,
27:35all right? It would just be like
27:37mitigated, right? Because the next
27:38candle just blasts right through it. So,
27:40it doesn't really make sense for you to
27:41draw it at the last bullish candlestick.
27:43So, I prefer to just draw it at the
27:46pivot candle,
27:48which can be bearish, can be bullish, I
27:50don't care. I'll just draw it at the
27:51pivot candle, which is really the origin
27:53point, right? So, in this case, I'm
27:55going to draw it from the high of the
27:56pivot candle to the low of this pivot
27:58candle, and this is my order block.
28:03All right? And let me just label that as
28:06order block, right? So, for some of you
28:08guys
28:09some some some for some of you guys
28:10newbies to actually like just just see
28:12it.
28:16Order block.
28:17Now,
28:18what about this right here, right? This
28:21gap right here is what we call your fair
28:23value gap.
28:25Fair value gap, imbalance, okay?
28:27Whatever you like to call them.
28:30So, now, using the concept that we just
28:33learned,
28:34you know, just combining everything that
28:36we have learned so far about order block
28:37and fair value gap, right now price has
28:39moved all the way down here.
28:41So, would I be entering for a sell right
28:44here?
28:45No, because it's a stupid decision to
28:47enter for a sell right here. If I enter
28:49for a sell right here, I'm just trading
28:51based on FOMO, right? It's just me
28:53rushing and trying to get in to the
28:55trade when the move has already
28:56happened. Right? You can see price has
28:58already came all the way down here. Why
29:00would you want to, you know, be part of
29:02this move, right? Why would you be a
29:03groupie, you know?
29:05You know?
29:06Like that's pretty much like a really
29:07good analogy, right? Like you don't want
29:10to do that. This thing has already been
29:12eaten. Now, if you eat it again, you're
29:15pretty much,
29:17you know, being the tuna body, right?
29:20You're pretty much being a tuna body.
29:22I don't even know where this is going.
29:23But like my point is price has already
29:26made its move, okay? Price has already
29:28made its move. You don't want to be the
29:30second guy. You don't want to be the
29:31third guy. You want to be the first guy,
29:32right? So, if that's the case, you're
29:34much more better off just waiting for
29:37price to pull back into any one of these
29:40areas right here, then you make your
29:42entry and short it all the way down
29:43here. Okay, because if you enter right
29:45here, you're risk placing a stop loss
29:47above this high, and then you're just
29:49going to have a very bad risk to reward,
29:52right? It just doesn't make sense. So,
29:54you're much more better off sitting on
29:55your hands, being very patient, and just
29:57doing nothing until price comes back
30:00up to the order block or the fair value
30:02gap. Let me go back to the example.
30:04Where is the example? Oh, there we go.
30:07Yeah, so in this case, you're much more
30:08better off just waiting
30:11and waiting.
30:13Okay, there's something wrong with
30:14TradingView right now. TradingView does
30:16not want me to shine today.
30:19Why is it? Let me just Let me just
30:21reload this, yeah.
30:23TradingView does not want me to shine
30:24today, man, because
30:26I guess this Market Mechanics Mentorship
30:28Series is just way too powerful. I'm
30:30revealing too much, man. I'm revealing
30:32too much. Like this the CEO of
30:34TradingView is like, "Yo, Bret Shoob,
30:36man. You're You're like sharing all of
30:37our secret sauce right here, man. You
30:39can't be doing this shit."
30:41Okay, I don't know where is the other
30:43example anymore. Was it on EU? Was it on
30:45GU? I can't even remember. So, what I'm
30:47going to do right now is that I'm just
30:48going to pull up like a random example,
30:51like a similar example.
30:53Let me try to find a similar example for
30:55you like maybe
30:57this one right here. Okay, this one
30:59right here.
31:01Okay, so similar example.
31:02Uh right here.
31:04Okay, so once again, using the same
31:06logic, imbalance over here, right?
31:10Order block over here. Let me just map
31:11that as my
31:13order block right there.
31:18This is the order block right there.
31:26And then this is the imbalance right
31:29here.
31:31There's a Okay, in this case, there's
31:32actually two imbalance, right? There's
31:34one here and then there's another one
31:36right here.
31:38Okay, sometimes these these things can
31:39occur, right? So, you can see
31:41imbalance number one, imbalance number
31:43two, right? We got two imbalance right
31:45here and then we got order block right
31:46here. So, like I said, back to what I
31:48was saying, you don't want to be the guy
31:50that is entering way too late. You're
31:53much more better off sitting on your
31:54hands and just waiting for price to
31:56mitigate either one of these zones, then
31:57you make your entry from there. Right?
31:59So, in this case, you do nothing
32:01and you just wait very patiently, right?
32:03Until price comes into your fair value
32:06gap. Once price comes into the fair
32:08value gap, now we can expect a move to
32:10the downside. And then this is where you
32:11can look for an entry.
32:13Okay, this is where you can look for an
32:14entry if you got your entry
32:15confirmation.
32:17Okay?
32:18Okay, so let's say in this case, you did
32:20not get an entry right here. Okay, cool.
32:22Price came all the way to up here. Okay,
32:23so price came all the way up here to the
32:25fair value gap, the next fair value gap,
32:27and it also mitigated the
32:28the order block that we have up here.
32:30So, now there's an even higher chance
32:33that price is going to move down right
32:34now.
32:35Because he has not only just mitigated
32:37the fair value gap, but also the auto
32:38block.
32:40And in this case, price actually
32:41reversed and hit up. Why? Right? Why did
32:44price not respect the auto block?
32:45Because I thought that's what's going to
32:47happen, right? You told me that price is
32:48just going to come down magically after
32:50it mitigate a bearish auto block, right?
32:52No.
32:53Like I said, it depends on the context
32:55in which you're applying the auto block
32:56from. If you zoom out and look at a
32:58higher time frame, you realize that
32:59price is actually incredibly bullish.
33:01So, if you're selling a auto block
33:04when price is actually bullish, what
33:06you're trying to do is that you're
33:07trying to stop a rocket from going up,
33:10right? You're just trying to defy the
33:12laws of gravity.
33:13Instead, what you should do in this case
33:16is to look for long positions at a
33:19bullish auto block.
33:21So, in this case
33:23let me just try to find like an example
33:25for you to to see.
33:27Okay, so in this case right here.
33:30Okay, let's look at the left hand side
33:32over here.
33:33Price came down, consolidated. Okay,
33:34this is demand zone, and then this is
33:36another demand zone.
33:38Okay, now what about this? Okay, so
33:42this right here
33:43right there we have an auto block right
33:45here.
33:48Okay, so in this case, imbalance to the
33:51upside, right? This is your bullish auto
33:53block.
33:56So, since that's a bullish auto block,
33:58what you could potentially do is to look
34:00for longs when price comes down to that
34:01bullish auto block to trade it to the
34:03upside.
34:05Assuming that you get your entry
34:07confluence in here.
34:08You get your entry confirmation in
34:10there.
34:11If price has came all the way down here
34:14right? You can see price has came all
34:15the way down here.
34:16It doesn't seem to be stopping
34:18whatsoever, and price just blasts right
34:20through it just like this.
34:22Then, okay, this is the classic
34:23liquidity sweep, which you're going to
34:25learn more about later on.
34:27Then, you shouldn't just be like
34:28blindly, you know, trying to enter for a
34:30long right here. Trying to force
34:31yourself to enter for a long right here.
34:33You're much more better off waiting for
34:36the confirmation, right? Waiting for the
34:37structure to shift.
34:39Okay, so in this case, what happens is
34:40that the structure starts shifting
34:41bullish, and then price goes up even
34:43further. So, if I go down to the lower
34:45time frame, I can see that you can see
34:48price came up here, they got the last
34:52lower high. Once this got taken out,
34:55then it started shifting bullish, right?
34:56Because we already got a market shift.
34:58And right now, price just continue
35:00bullish. But before it does, notice
35:02where price pull back to, right? So,
35:04after this market shift, we got a break
35:05of structure to the upside right here.
35:08And then, this is where we can identify
35:10an imbalance over here, right? You can
35:11see huge bullish candlestick right here.
35:14Imbalance have been formed right there.
35:17This is your fair value gap.
35:23Right there, this is the fair value gap.
35:25And then, this becomes
35:28the order block, right? This becomes the
35:30order block.
35:32>> [snorts]
35:33>> So, this is the 4-hour fair value flip
35:35zone.
35:36Uh this is the 4-hour fair value gap.
35:38No, this is the 1-hour fair value gap.
35:39So, in this case, what happens is that
35:40price actually pull back to the fair
35:42value gap, mitigated the fair value gap,
35:44and let's see where the price got a
35:45reaction from there, and then continue
35:48going up even further. Right? So, that's
35:50another thing that I wanted to like tell
35:51you guys about.
35:54Price doesn't always have to come down
35:56to the order block. Sometimes it can
35:57come down to the order block and then
35:59go. Sometimes it can just go down to the
36:01fair value gap and then go. It all
36:04depends on the amount of liquidity
36:08the market has
36:10when price is approaching the zone
36:12itself. Okay? So, all we have to do is
36:15to like just mark those zones up and
36:17just expect price to come down to either
36:19one of those zones.
36:21And out of whichever those zones
36:23whichever one actually gave us the entry
36:25confirmation, entry trigger, that's the
36:27zone in which we want to enter the trade
36:29from. Okay, so we are going to talk
36:30about entry confirmation entry trigger
36:32later on.
36:33But I hope that I've shined some light
36:35in terms of how to properly identify
36:38order blocks.
36:39Just to give you like one last example,
36:42it'll probably be this one right here.
36:45So, in this case, price came down very
36:47aggressively over here.
36:49And then you can see this is price
36:51consolidated around here, started
36:53dumping heavily right here.
36:55And then this is where is the order
36:56block right here? No, there's no order
36:57block here.
36:59Okay, yeah, maybe this one right here.
37:01Yes, there is order block right here.
37:03Okay, so this is where price moved down
37:05very aggressively just like this.
37:08I wouldn't really even like consider
37:10that as order block to be honest with
37:11you.
37:12It's more of like just price, you know,
37:14pulling back and coming down more of
37:15like a regular supply zone.
37:17But let's say it's order block. Okay,
37:19because this is something important that
37:20I want to show you guys.
37:22You apply a premium and discount tool
37:23just like this, right? Swing low, swing
37:25highs.
37:26And then this is where
37:28let's say there's another order block
37:30that we have up here. All right, in this
37:32case, which order block is price most
37:35likely going to respect?
37:36Is price going to respect this order
37:38block or this one right here?
37:40Well,
37:42most likely, once again, based on
37:44probabilities, price is most likely
37:46going to come up and mitigate this
37:47before reversing.
37:49All right, like
37:51in terms of probabilities,
37:53this zone has like a 80% chance of
37:54holding. Well, this zone only have like,
37:56let's say a 50% chance of holding.
37:59Once again,
38:01just in terms of probabilities, right?
38:04Just purely because of the fact that
38:05this zone is higher up here within the
38:07premium pricing.
38:10But you can see, because of the fact
38:11that this is still some of like a supply
38:13zone or even like a order block if you
38:15call it,
38:16price did get a reaction from it, right?
38:18Price moved all the way up here, reacted
38:20from it, right? Literally touched it and
38:22it started reversing and heading back
38:23down.
38:25So, it did get a reaction from it,
38:27right? So, you cannot doubt the
38:28effectiveness of order block. It still
38:30did its job, right? It's just the extent
38:34in which price moved right after the
38:36mitigation.
38:37And that is determined by the strength
38:39of the order block itself.
38:41Right? So, in this case, you can see
38:42this thing is way more stronger than
38:44this thing right here.
38:46When price mitigate this, it caused a
38:48little move. When price mitigate that,
38:50it caused a huge move to the downside.
38:52Same order block, we literally apply the
38:54same principles to identify the order
38:56block, but because you place them in
38:57different context, different location,
39:00one allow you to get a much better trade
39:05compared to the other one. You know,
39:08compared to the other one that we have
39:10right here.
39:13So, that's why it's so important for you
39:15to not just understand how to identify
39:17order blocks, but also understand how to
39:21identify valid order blocks,
39:24when to trade the order blocks, but most
39:26importantly know when not to trade the
39:28order block, right? Know how to combine
39:31the fair value gap with order block,
39:32with market structure, with supply and
39:34demand zones, with all of these good old
39:36market mechanics concepts that you're
39:38going to be learning soon as well.
39:40So, to keep it simple, an order block is
39:42basically the last candle before a
39:45strong impulsive move that causes
39:48displacement.
39:49It's the origin point, right? It's the
39:52first time that smart money entered into
39:54the market. Now, your job is to get in
39:57the second time they want to actually
39:59enter at that exact price point, right?
40:02Your job is to catch this imbalance
40:03move. And you're able to catch a trade
40:05at imbalance move by identifying the
40:07order blocks and entering when you see a
40:10confirmation at that price point, at
40:13that time.
40:16So, yeah.
40:17I guess what I'm trying to say is that
40:18like
40:20please
40:21just understand the logic behind order
40:23block, right? Don't just blindly stick
40:26to these principles just because I say
40:28so.
40:30Test it out, you know, gather some
40:31experience trading with it, and then
40:34based on that you will realize that, you
40:36know, based on data
40:38it works.
40:39Okay? Like men lie, women lie, but
40:41numbers don't lie. Numbers don't ever
40:44lie.
40:45So, yeah, this is something that I've
40:46just tested it out myself, and I
40:48realized how effective order block is.
40:50But as effective as it may be
40:54it still depends on a lot of different
40:56factors, right? Liquidity, supply and
40:59demand zones near it, inducements, order
41:02flow, market structure.
41:04If all of those stuff is misaligned,
41:07then the order block, no matter how
41:08strong it is, is just not going to work
41:09out.
41:10Right? It can be the strongest order
41:12block that led to the most freaking
41:13imbalance move out there, but if it
41:16doesn't have multiple evidence, multiple
41:19variables, multiple confluences backing
41:21it up, it's useless. It's good as
41:23nothing. Price will just blast right
41:25through it.
41:27So, with that being said
41:29just continue practicing more, continue
41:30putting in the reps, and
41:33honestly, like this concept is quite
41:34simple. I don't think like I need to
41:36dive too deep into it because if you
41:38guys understand imbalance and fair value
41:39gap, you will be able to identify the
41:41order block very easily, right? It's
41:43just adding one more step to it.
41:46Yeah, so practice more, and the more you
41:48practice the better you get at this,
41:50okay? With that being said, I look
41:51forward to seeing you guys on the next
41:52episode, and as always, remember you're
41:54just one trade away.

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