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SECRETS of ORDER FLOWS and ORDER BLOCKS🔥 | Smart Money Concepts Course | Episode - 6 | SMC | ICT — Transcript

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0:05hello Traders welcome back to another
0:07episode of the complete course on Smart
0:09money Concepts in this video we are
0:12going to learn two important topics in
0:14SMC they are order flow and Order blocks
0:17these are related topics so it makes
0:19sense to make a single comprehensive
0:22video on these topics so that we can
0:24learn how they are different from one
0:26another now let me warn you this is
0:28going to be the longest video in this
0:30entire course so watch it when you have
0:32adequate time because this is one of the
0:34most demanded smart Money videos in the
0:37previous episodes we have discussed the
0:40concepts of liquidity in great detail
0:42which is actually the core of SMC
0:44learning and if you haven't watch these
0:46episodes I strongly urge you to watch
0:49them right away now a fair understanding
0:51on liquidity will give you a lot of
0:53insights into the ways Which smart money
0:56institutions operate but that is not
0:58enough to convert into profit profitable
1:00trade setups for getting the best
1:02possible trades you need to have a fair
1:04idea as to where to take the entries
1:07this is where order flow and Order block
1:09come into the equation these are simple
1:12yet effective methods by which you can
1:14spot potential areas from which you can
1:16hope into a trade position with minimal
1:19risk and high chances of profits so in
1:22this episode we are going to start our
1:24discussion with orderflow how to
1:26identify an orderflow in charts what are
1:28the different types of order flows and
1:31how do they work then we will discuss
1:33about order blocks why is it important
1:36to have an order block how to spot an
1:38order block the different types of order
1:40blocks and what are all the key points
1:42that you need to keep in mind and we
1:44will also learn how to identify a valid
1:46order block we will not talk about order
1:48Block refinement in this video we will
1:51cover it in a separate video so watch
1:53this video till the end so that you will
1:55not miss any important aspect and if you
1:58appreciate our work in creating valuable
2:01content free of cost make sure to like
2:03and share this video and if you're new
2:05to this Channel or you haven't already
2:07subscribed do make sure to subscribe and
2:09also enable the Bell notification so
2:12that you will never miss any upcoming
2:14update so without wasting any time let's
2:16get started we will begin with the order
2:19flow I have told you in the liquidity
2:21videos that market moves from one area
2:24of liquidity to the other this can
2:26either be internal or minor liquidity or
2:29external or major liquidity the market
2:31can tap into either of these liquidity
2:33areas or zones and then reverse the
2:36price Direction after sweeping the
2:38retailer orders in the charts a lot of
2:40such liquidity areas are generated and
2:43it is obvious that not all of them are
2:45worth considering and only a few of them
2:48will provide us with high quality trade
2:49setups so how are we going to capitalize
2:52on our knowledge in order to make highly
2:54probable and profitable trades while
2:56reducing the risk of overtrading or
2:59simply simply getting into trades at all
3:01these liquidity areas this is where
3:04order flow and Order blocks come into
3:06the picture so think of an orderflow as
3:08that price move in the chart which to
3:10most extent reveals where the smart
3:12money hides their positions or where
3:14they are most likely to initiate their
3:16positions if you have observed the flow
3:18of prices in the market structure you
3:20will notice that the price will not
3:22always tap into the external structure
3:24before reversing its direction the
3:26market might reverse even before that
3:29this is due to the existence of order
3:30flows technically there are two types of
3:33order flows these are bullish order flow
3:36formed during an upward Market structure
3:38and a bearish order flow which is formed
3:40during a bearish market structure I have
3:42said this many times but I will say it
3:44again that you need to have a good
3:47understanding as to how to Mark the
3:49market structure properly in order to
3:51make the best use of these Concepts if
3:53you get your Market structure mapping
3:55wrong everything else will meet the same
3:57fate so make sure to watch the first
3:59first episode if you haven't already now
4:02coming back to our discussion let us
4:03consider a bullish Market structure and
4:06try to spot the order flow during a
4:08bullish Market the major price structure
4:10forms higher highs and higher lows But
4:13If You observe the corrective moves you
4:15will notice that it forms lower highs
4:17and lower lows so a bullish order flow
4:20is represented by the last selling price
4:23before the bullish price momentum or in
4:25simple terms the last selling move
4:27before the buy is called as the bullish
4:30order flow therefore all you have to do
4:32is to identify the bearish candles
4:34before the price begin to move higher
4:37this is how we spot bullish order flows
4:39in the charts let us now learn how to
4:41spot a bearish order flow you will find
4:43bearish order flow in a bearish market
4:45structure in a beer market the major
4:48structure forms lower highs and lower
4:50lows while the corrective moves forms
4:53higher highs and higher lows and the
4:55bearish orderflow is represented by the
4:57last buying price move before the OWN
4:59ongoing bearish price momentum or in
5:01other words the last buying move before
5:03the drop or sell is called as a bearish
5:06order flow therefore you need to
5:08identify the bullish candles before the
5:11price begin to drop lower but is the
5:13order flow that we have identified a
5:15valid one this is a question which is
5:18very important to consider order flows
5:20can be classified into three types these
5:22are mitigated order flows unmitigated
5:25order flows and failed order flows out
5:28of these three only only the unmitigated
5:30order flows are of any use to us but for
5:33the sake of understanding I will explain
5:35all of them basically a mitigated order
5:38flow is one where the price has already
5:40tested or mitigated the order flow think
5:42of an order flow or even an order block
5:45as a one-time use thing once it is
5:47tested or mitigated it is of no use to
5:50us anymore it is not like our typical
5:52support or resistances where the price
5:54will respect it multiple times but this
5:57is not the case with order flows and
5:59Order order blocks check out this
6:01example we have identified the last
6:03selling move before the buy so
6:05technically this area is an order flow
6:07but if you notice closely you will see
6:10that the price has tapped into the
6:11bullish order flow therefore this
6:13bullish order flow is mitigated by
6:16prices this means that the order flow
6:18will not work in the future look at
6:20another example but this is for a
6:22bearish structure we can spot the last
6:25buying move before the drop and Mark
6:27this area as a bearish order flow then
6:29you will notice that the price has
6:31tapped into this order flow and
6:33therefore it is already mitigated so
6:36this order flow will not work for the
6:38future price moves and it is not worth
6:40considering the second type is
6:42unmitigated order flow in this case the
6:45price will not tap into the order flow
6:47or the price will not mitigate the order
6:49flow these are the order flows which are
6:51useful to us this is because there is a
6:54high probability that the price might
6:56return back to mitigate this order flow
6:58now we can take take a few examples to
7:01understand this better in this first
7:02case the market is in a bullish Trend so
7:05during the corrective move the price
7:07forms lower lows and lower highs our
7:10order flow will be the last selling move
7:12before the buy once we have marked the
7:14order flow we can observe that the price
7:17has not tested or mitigated this bullish
7:20order flow it also means that the price
7:22could come back to this order flow later
7:24to mitigate it so this is an unmitigated
7:27order flow similarly if we spot a
7:30bearish order flow in a bearish market
7:32structure and the order flow is not
7:34tested or mitigated by prices then this
7:36is an unmitigated order flow Zone which
7:39could be a potential area of interest
7:41for a price reversal in the future now
7:43keep in mind that even the vix
7:45projecting into an orderflow Zone
7:47mitigates it so the tiniest of tiny
7:50Details Matter now what is a failed
7:52orderflow so it is an order flow which
7:55we have identified and marked through
7:57which the prices passes through just
7:58like a mitigated order flow failed order
8:01flows are of no use to a Trader another
8:03point to keep in mind is that once an
8:05order flow is mitigated you can always
8:07shift towards the next one and if the
8:09next one is also tested then you can
8:11shift towards the next orderflow and so
8:13on now let us briefly look at how to
8:16take trades using the orderflow concept
8:19the idea is to take a trade from The
8:21orderflow Zone and price comes back to
8:23test the order flow during a pullback
8:25which follows the break of structure and
8:27then take a trade entry and the price
8:29begins to reverse from the order flow
8:31after mitigation as I have mentioned a
8:34few times this should only be applied to
8:36unmitigated order flows if you know how
8:39to correctly Mark the market structure
8:41and identify the pullbacks then this is
8:43going to be very easy now let us
8:45consider an example for bullish and
8:47bearish scenarios this is a bullish
8:49Market structure here you can see that
8:52the price has created a bullish break of
8:54structure when it broke above the
8:56previous major swing High we can
8:58identify the mitigated order Flow by
9:00using the method that we have learned
9:02now we have to wait for a valid pullback
9:04to happen and as you can see the
9:07pullback returned to our unmitigated
9:09order flow and tested it by now we can
9:12anticipate two outcomes to happen either
9:14the price can break below our order flow
9:17forming a failed order flow resulting in
9:19not trates or the price can test the
9:21order flow and reverse its direction to
9:23move along with the major bullish
9:25structure if it were the second scenario
9:27we can take a long trade above the
9:29bullish order flow while keeping the
9:31stop- loss below the order flow Zone our
9:33minimum Target should be the most recent
9:36swing high or the major higher high
9:38level in a similar manner we can discuss
9:40the scenario for a bearish market
9:42structure as you can see the price has
9:45formed a bearish breakoff structure when
9:47it broke below the previous major swing
9:49low level we can mark the unmitigated
9:52order flow Zone here then we will have
9:54to wait for a valid pullback to happen
9:56we can observe that the pullback return
9:59learn to test the unmitigated order flow
10:01as in the previous scenario two outcomes
10:03are possible first the price could just
10:06break past the order flow resulting in
10:08no trade the other scenario is when the
10:11price tests the bearish unmitigated
10:12order flow and reverse lower to move in
10:15the existing Major Market Direction
10:17which is bearish in that case we can
10:20look to take a short trade below the
10:22order flow after it has been mitigated
10:24while keeping our stop loss above the
10:26order flow Zone and our minimum Target
10:29level should be the most recent swing
10:31low level or the lower low level this
10:34orderflow concept can also be applied to
10:37the minor Market structures or in your
10:39lower time frame charts for the sake of
10:41taking short-term trades or for grabbing
10:43some quick points I have marked out some
10:46bullish as well as bearish cases here an
10:48important point to noce that if there
10:50are multiple unmitigated order flows
10:53formed within a major structure then
10:55there is a high probability that the
10:57market will return back to the most most
10:59extreme orderflow while failing all
11:01other orderflow areas or in other words
11:04the extreme orderflow zones have a
11:06higher probability of providing us with
11:08a successful trading opportunity now you
11:10can pause the video and take a note of
11:12the points mentioned or else the video
11:15will get very long I hope this will be
11:17useful for many scalpers and intraday
11:19traders who just wants to catch a few
11:21quick points now there are a few
11:24drawbacks with order flows that all
11:26Traders need to be aware of first of all
11:29stop losses will be considerably large
11:31since orderflow is a zone or an area in
11:33the chart we will have to place our stop
11:36loss Beyond this zone or area even then
11:38we cannot be absolutely sure that the
11:40price will not return to hit our stop-
11:42loss and because of a large stop loss
11:45the reward to risk also reduces the
11:47reward to risk provided by an order flow
11:49trading opportunity is lower compared to
11:51that given by an order block trading
11:53opportunity another problem with order
11:55flow is that there is no proper entry
11:57criteria entry a trade position from an
12:00orderflow zone is mostly about our
12:02intuitions and reward to risk
12:04considerations yet another problem which
12:06is committed due to human error is the
12:08wrong identification and marking of
12:10orderflow areas if you make the mistake
12:12of marking the orderflow wrongly then
12:15most probably the price W return to
12:16mitigate it or sometimes it will even
12:18fail the order flow now take a look at
12:20this case tell me where to Mark the
12:22orderflow area by definition a bullish
12:25order flow is the last selling move
12:27before the buy so if you follow this
12:29definition blindly then we will mark
12:31this area as the orderflow but this is
12:33not the correct orderflow Zone the area
12:36that we have highlighted is just an
12:38internal move or consolidation the real
12:41autoflow is this whole selling move the
12:43reason why I say this is because the
12:45consolidation did not take out the low
12:47of the selling move if it would have
12:49taken out the previous low then there is
12:51no issues with considering it as an
12:53orderflow and you can see how the price
12:55returned to test the order flow
12:57similarly while marking a bearish order
12:59flow which is the last buying move
13:01before the sell you have to make sure if
13:03the move is just an internal move or
13:05consolidation or is it actually taking
13:07out the high of the previous move now
13:10let us shift our attention to aut blocks
13:13aut blocks are considered as a
13:14refinement of an orderflow order blocks
13:17eliminates a lot of issues that an order
13:19flow had order blocks provide you with
13:21limited traes which are of high quality
13:24and have a high probability of success
13:26secondly the reward to risk ratio is
13:29largely improved when using order blocks
13:31this means the stop-loss setting is much
13:33tighter the trade entries are also more
13:36optimized due to the limited number of
13:38trades on offer but on the downside a
13:40tight stop loss can be taken out by
13:42volatile price wings let us first learn
13:45the textbook definition of order blocks
13:48and how to identify and mark the order
13:50blocks in a bullish Market scenario a
13:53bullish aut block is identified as the
13:55last bearish candle before the buy and
13:57during a bearish market Market structure
13:59a bearish order flow is considered as
14:01the last bullish candle before the sell
14:04so you have to spot the last bullish or
14:06bearish candle before an Impulse price
14:08move and Mark its highs and lows this is
14:11considered as an order block by most
14:14stock market teachers AKA gurus if you
14:17follow this logic and start marking
14:18order blocks you'll be shocked to notice
14:21that there will be a large number of
14:23order blocks on the charts and you'll
14:25obviously be confused as to which order
14:27blocks will work and which won't this is
14:30a vague way of explaining what an order
14:32block is and it is of very little use to
14:34a Trader the majority of order blocks
14:37obtained using this method is useless
14:39and it won't work to identify and Mark
14:42only valid and high probability order
14:44blocks I will introduce you to seven
14:47important factors these are Concepts
14:49that you have already learned in the
14:51previous episodes of this s SMC course
14:53so it is nothing new and you don't need
14:55to stress about it a lot here are the
14:58seven factors the first point is that
15:00you should Mark order blocks on higher
15:03time frames only so if you are an
15:04intraday player then 15 minutes can be
15:07your higher time frame and you should
15:08Mark your order blocks on this time
15:10frame only second one is that there
15:12should be a valid break of structure the
15:15third thing is to look for the last
15:17buying candle before the sell for a
15:19bearish market structure and look for
15:21the last selling candle before the buy
15:23for a bullish Market structure but
15:25certain conditions apply to this step
15:27the fourth factor to notice is that
15:29there should be an imbalance or a fair
15:31value Gap another important thing to
15:33look out for is that there should be a
15:35proper inducement after the break of
15:37structure this is to avoid falling into
15:39the smart money trap next point is that
15:42there should be a proper liquidity sweep
15:44of the previous highs or previous lows
15:47depending on the market structure and
15:49the final thing to check for is to see
15:51whether the order block is associated
15:53with an unmitigated order flow now if
15:56you manage to identify and Mark order
15:58block blocks based on these seven
16:00factors then you will come to the
16:01realization that there can only be a
16:04maximum of two valid order blocks within
16:06a certain swing move also the minimum
16:09number of aut blocks within a swing move
16:11is one we will learn about these two
16:13valid Auto blocks very soon but first
16:15let us discuss in great detail about the
16:17seven factors for identifying and
16:20marking valid order blocks so the first
16:22factor is time frame I have mentioned at
16:25the beginning of this course that
16:27structure mapping has to be done on high
16:29time frames and trade entries are to be
16:31taken on low time frames depending on
16:34your trading style similar logic applies
16:36to order blocks also the order blocks
16:38are to be identified and marked on your
16:41higher time frame charts this order
16:43blocks will be lower in number and has a
16:45higher chance of success compared to
16:47those order blocks marked on Lower time
16:49frames once the higher time frame order
16:52blocks are marked then we can turn to
16:54our lower time frame charts to refine
16:56our order block for better entry prices
16:58for example if you are an intraday
17:00Trader then you can Mark valid order
17:02blocks on your high time frame which is
17:0415 minutes and once you're done with
17:07marking the order blocks you can go down
17:09to your lower time frame such as 1
17:11minute 2 minute or even 3 minute charts
17:14and refine your order block for taking
17:16better trade entries this is called
17:18Lower time frame orderflow refinement
17:20this method will help you analyze the
17:22trend and take positions with better
17:25reward to risk now the second factor is
17:27to have a valid breakoff structure the
17:30market should form a valid breakup
17:32structure before we can actually start
17:34to Sport and mark the order blocks order
17:37blocks are not valid until and unless
17:39there is a proper break of structure or
17:41a change of character in prices you may
17:44already be familiar with how to Mark the
17:46market structure by identifying boss and
17:48chalk I won't go into all those details
17:51you can always go back and watch the
17:53comprehensive video on Market structure
17:55mapping anyways during a bullish Market
17:57structure forming higher highs and
17:59higher lows we will only start to look
18:01for order blocks when the price has
18:03broken and closed above the previous
18:05swing high level in this case we will
18:08look for bullish order blocks since the
18:10overall idea is to ride the existing
18:12Trend but in case if the market has
18:15broken down and closed below the
18:17previous major higher swing low level
18:19which results in a bearish break of
18:21character then we will look for bearish
18:23order blocks only but a valid break of
18:26structure or a change of character is
18:28not the only metric to conform before
18:30spotting the order blocks we also need
18:32to check for inducements I have seen
18:35Traders Mark bearish order blocks on
18:37bullish market trends and vice versa on
18:39bearish trending markets they are
18:41literally trying to grab the minor or
18:43internal swing moves this may work on
18:46some occasions but most often the price
18:48end up breaking through these low
18:50probability order blocks marking order
18:52blocks on a higher time frame and then
18:55refining it on Lower time frame is one
18:57thing but marking counter order blocks
18:59against the existing Market structure
19:02can result in big losses so I will never
19:04ask you to bet against the market in
19:06fact it is the wrong approach in a
19:09similar manner you should only Mark
19:11order blocks once the price has broken
19:13and closed below the previous major
19:15lower swing low level this is a valid
19:17bearish breakup structure and for this
19:19instance we will only look to identify
19:22and Mark bearish order blocks and if the
19:24price has broken and closed above the
19:26previous lower swing high level which is
19:28a bullish change of character then we
19:30will look for bullish order blocks I
19:32hope things are making sense we have
19:35already discussed about the third point
19:37but still certain things need more
19:39clarification so in order to identify a
19:42bullish order block you will have to
19:43find the last bearish candle before the
19:46buy but it is not so straightforward
19:48there are other things that you need to
19:50look for the point is to check if there
19:52is a liquidity sweep involved this means
19:55that the last scandle that we have
19:57spotted should take out the previous
19:59minor low formed this also means that
20:02next candle should not take out the low
20:04of our last selling candle now if you
20:06are unaware of what liquidity and
20:08liquidity sweep are then I suggest you
20:10to watch my videos on the same topic so
20:13if the last selling candle was unable to
20:15take out the previous liquidity or if
20:17the succeeding candles take out the low
20:19of our last selling candle then we will
20:22not consider this candle for marking our
20:24bullish order Block in addition to this
20:26an imbalance should be formed after our
20:28last selling candle is formed in case of
20:31a bullish structure so technically there
20:33should be a fair value gap between the
20:35high of our last selling candle and the
20:37low of the third candle encountered from
20:39our last selling candle it does not
20:42matter if this imbalance is wide or
20:44narrow the only condition is that there
20:46should be an imbalance between these two
20:48candles as I have mentioned earlier we
20:51should only start checking for order
20:53blocks and imbalances only after a valid
20:55break of structure or a change of
20:57character in the swing structure if any
20:59of these two conditions are not met then
21:01our bullish order block is not a valid
21:03one so if there was no liquidity sweep
21:06then we can shift our order block to
21:08that candle which has actually taken out
21:10the liquidity or the previous minor low
21:12level this indirectly mean that while
21:15marking a valid order block the color of
21:17the candle doesn't really matter what
21:20matters is whether the minor liquidity
21:22was swept or not now even if we have
21:24spotted the last candle which has taken
21:26out the liquidity at the previous minor
21:28low if there is no imbalance between our
21:31marked candle and the third numbered
21:33candle then we cannot mark this as a
21:35bullish order block and even if there
21:37was an imbalance between the highs and
21:39lows of these candles but if this
21:41imbalance is mitigated then also we
21:43cannot Mark our first candle as a
21:45bullish order block so the fair value
21:47Gap is the most important factor to
21:49consider while marking a valid order
21:51block and once a liquidity sweep and an
21:54imbalance is confirmed then we can mark
21:57the high and low of our first candle
21:59which will become our bullish order
22:01block another interesting observation
22:03that might be useful is that once you
22:05have identified the last selling candle
22:08or the candle that have swept the
22:09liquidity of the previous minor low and
22:12if the succeeding candles are formed
22:14within the highs and lows of this first
22:16candle then these candles don't really
22:19have any importance and these are just
22:21internal consolidations in this case we
22:24will only consider the candle which
22:26breaks the high of our first candle and
22:28this will be our second candle you can
22:30then check for imbalance between these
22:32three candles and not take into account
22:34the consolidating candles I have talked
22:37about imbalances and also about such
22:39internal consolidations in my fair value
22:42Gap episode so you can check that video
22:44to know more the logic Remains the Same
22:47while marking a bearish order Block in a
22:49bearish market structure after a valid
22:51breakout structure I won't go deep into
22:53all the details here as always the first
22:56step is to ensure that there is is a
22:58valid bearish breakoff structure then
23:00you have to look for the last buying
23:01candle before the sell make sure that
23:04this candle has taken out the previous
23:06Minor High if it is not the case you can
23:08shift towards the right to find that
23:10candle which has swept the previous
23:12Minor High Level so the color of the
23:14candle doesn't really matter when
23:15marking the order blocks what matters is
23:18this liquidity sweep the next Factor
23:20after this is to check whether there is
23:22an imbalance or fair value gap between
23:25the first candle's low that we have
23:27identified and the third candle is high
23:29if there is no imbalance or gap between
23:31them then the order flow is not valid at
23:34all but if there is an imbalance between
23:36the first candle's low and the third
23:38candle's High then we can mark the order
23:40block by drawing lines at the highs and
23:43lows of the first candle that we have
23:44identified in some cases multiple
23:47internal consolidating candles can be
23:49formed Within These highs and lows of
23:51our liquidity grabbing candle you don't
23:53have to consider these candles I have
23:55already stated the reason as to why this
23:57is so you can mark the candle which
24:00breaks the low of our first candle as
24:02the second candle for the imbalance
24:04identification this is how you Sport and
24:06Mark a bearish order block properly but
24:09to filter the best order blocks you need
24:11to consider more factors earlier in this
24:14video I have mentioned that there can be
24:16a minimum of one order block and a
24:19maximum of two order blocks between a
24:21swing High and a swing low these are
24:23number one the extreme aut block and the
24:26second one is the decisional POI or the
24:28decisional order block both order block
24:31and POI or price of Interest are used in
24:34a similar sense now both these types of
24:37Auto blocks work in the market if
24:39properly identified and marked the
24:41extreme auto block is considered the
24:43high probability OB because it is the
24:45last resort for price to make a reversal
24:48as there is enough liquidity and
24:49imbalance available the reason why there
24:51can only be two valid order blocks can
24:54be either due to inducements or it can
24:56be due to order flow mitigations I will
24:59explain both let me start with
25:01inducements I have made a detailed video
25:03on inducements in the previous episode
25:06uh make sure to watch that video to get
25:07a proper idea on the topic anyways
25:10inducement is considered as the first
25:12pullback after a valid break of
25:14structure has happened the pullback can
25:16be a minor one If You observe in this
25:18figure then the first pullback after the
25:21bullish break of structure is marked
25:23using a line with a dollar sign it is
25:25essential for price to take out this
25:27inducement only then we can identify our
25:30valid order blocks from the smart money
25:32traps but as you can see here the price
25:35moved higher without sweeping the
25:36inducement the price formed another
25:39minor pullback keep in mind that the
25:41minor pullbacks can be a single bearish
25:43candle or a group of candles against the
25:46bullish price flow when price forms a
25:48new pullback then we will shift our
25:50inducement level at the low of this
25:52pullback and if the price still moves
25:54higher without taking out the liquidity
25:56below this pullbacks low then once again
25:58we can shift our inducement level to the
26:00minor pullback formed at the higher
26:02level and in this case the market has
26:04taken out the inducement as the price
26:06has crossed below the pullback losss now
26:09I will tell you why this is important
26:11see during the minor pullback after a
26:14bullish break of structure you can Mark
26:16a bullish order block at one or more of
26:19these levels but the bullish order block
26:21drawn at the highest pullback level is
26:23of low probability and there are high
26:26chances that the market will come back
26:28to take out the liquidity and break
26:30below this order block and move lower
26:32many Traders make the mistake of marking
26:35this order block and when the price give
26:37a reaction near this order block they
26:39initiate a long position but the chances
26:42of this trade failing is very high so
26:44this is not really an order block but
26:46instead it is a trap commonly known as
26:49the smart money trap so no matter what
26:52the scenario never try to take a trade
26:54until and unless you haven't confirmed
26:56that the indued inducement is taken out
26:59once the inducement is taken out you can
27:01use the orderflow mitigation rule to
27:03further filter order blocks if there are
27:05more than two of them we will come to
27:07this in a short while meanwhile let us
27:10understand inducement for a bearish
27:12market structure in this case the price
27:14did a bearish break of structure below
27:16the previous Wing low and then it formed
27:19a minor pullback higher we will draw a
27:21line at the high of this pullback with a
27:23dollar symbol to Mark the inducement
27:25level and as you can see Market moved
27:27lower without taking out this inducement
27:30then it Formed another minor pullback so
27:32now we will shift our inducement level
27:34at this pullback High then you can
27:36notice how the price moved higher and
27:38grab the liquidity Above This pullback
27:40level or in other words our inducement
27:43is taken out once the inducement level
27:45is taken then we can look towards other
27:47order blocks for taking a trade now if
27:49there are still multiple order blocks
27:51available even after applying all these
27:53rules then we can further filter them
27:56using the order flow mitigation rule
27:58this concept is very simple and easy to
28:01understand you might already have an
28:03understanding of what an orderflow is
28:05and how it works so if I were to talk
28:07about a bullish Market structure then
28:09the last selling move before the buy or
28:11the impulse is our bullish order flow
28:13and the last selling candle or that
28:15candle which has swept the liquidity of
28:17the previous minor low and having a fair
28:20value gap between them will be our
28:22bullish order block this rule asks a
28:24Trader to Mark the order flow associated
28:27with an order block and then check if
28:29the order flow is mitigated or not in
28:31case if the order flow is mitigated then
28:33the order block associated with it will
28:35be of low probability or it can also be
28:38neglected and if the order flow is also
28:40unmitigated then the order block and
28:42Order flow are both high probability
28:45areas from which price can take a
28:47reversal this filtration method using
28:49order flows will reduce the number of
28:51aut blocks marked between a swing low
28:54and a high to a maximum of two and a
28:56minimum of one now finally let us
28:59summarize what we have learned we will
29:02consider a bullish Market scenario first
29:04this is a one day time frame of Euro USD
29:07chart but you can choose any chart on
29:10any time frame based on your trading
29:11style here you can see that the price
29:14has managed to break and close above the
29:16previous higher swing so this is a valid
29:18bullish breakup structure and we can
29:21name it so the first condition is met
29:23now as the price moves higher we need to
29:26look for the inducement level
29:27inducements as you are familiar with are
29:30formed at the lows of the minor
29:31pullbacks being created usually after a
29:34valid structure break here as the price
29:36moves higher it forms a minor pullback
29:39the low of which we will draw a small
29:41horizontal line the minor swing low is
29:44our inducement level now price moves
29:46higher once again without grabbing the
29:48liquidity below our inducement level as
29:50the market moves up prices forms another
29:52minor pullback based on our rule we will
29:55now shift the inducement level to this
29:57newly formed swing high level but once
29:59again the market moved higher and formed
30:02another single candle pullback without
30:04sweeping the previous inducement again
30:07we will have to shift the inducement
30:08level to this new minor low formed we
30:11can clearly see how we should Mark the
30:13inducement only on the impulse price
30:15move now finally price makes a
30:18correction and takes out our inducement
30:20level this implies two things number one
30:23the highest price before the inducement
30:25sweep will become our higher high
30:27secondly it also means that the price
30:30can now tap into any liquidity level or
30:32Zone and probably reverse higher this is
30:35also a go-ahead sign that we requir to
30:38begin marking our order blocks so start
30:40from the lowest point on the impulse
30:42price wing for finding bullish order
30:44blocks start finding the last bearish
30:47candle before the buy which should
30:48necessarily take the liquidity below the
30:51minor swing low and it should also be
30:53associated with an imbalance or a fair
30:55value gap which is unmitigated now based
30:58on these criteria if we consider this
31:00bearish candle then we would be marking
31:02the order block falsely it is because
31:05this candle did not sweep the liquidity
31:07and there is neither an imbalance
31:09associated with it the candle which
31:11absorbed the minor liquidity is the next
31:14bullish candle and there is a fair value
31:17gap between this candle and the third
31:19candle which is unmitigated so we will
31:21have to shift our order block to this
31:23first bullish candle we can mark the
31:26highs and lows of this candle and this
31:28is our high probability extreme order
31:30block you might have understood how the
31:33color of the candle is less significant
31:35in comparison to the liquidity grab and
31:37fair value Gap criteria as I have
31:40mentioned earlier a maximum of only two
31:43order blocks are possible here you can
31:45see how this bearish candle sweeps out
31:47the liquidity below the previous minor
31:49low with its deep Wick in addition there
31:52is also an imbalance or inefficiency
31:54between the first and third candles and
31:56it remains remains unmitigated so this
31:58becomes our second aut block just Mark
32:01the highs and lows of this bearish
32:02candle this is the decisional order
32:05block which has a 50% chance of working
32:08in addition to marking the order blocks
32:11also make sure to draw the imbalances or
32:13fair value gaps associated with them now
32:16let's see how the price responded price
32:18moved lower and it took a reaction from
32:20the decisional POI or the decisional
32:23order block it also mitigated the
32:25imbalance in that area now here's the
32:27thing when presented with two order
32:29blocks that is a decisional order block
32:32and an extreme order block we should
32:34look to take a position from the extreme
32:36order block because this is a high
32:38probability order block than a
32:39decisional order block and it also helps
32:42us to buy a discount prices we will talk
32:44about premium and discounts in one of
32:46our upcoming videos so here the price
32:49took a reaction from the decisional
32:51order block but then it break down below
32:54this order block keep in mind that the
32:56order flow and Order blocks are just a
32:58onetime use thing so we will neglect the
33:01decisional order block now then the
33:03price declined lower and it mitigated
33:05the imbalance and interestingly moved
33:08higher without taking our high
33:10probability extreme order block one of
33:12the reasons why the order block was not
33:14tested was due to the fact that the
33:16bullish order flow which is the last
33:18selling move before the buy that is
33:21associated with our extreme order block
33:23was mitigated as you can see here it is
33:25one of those filters that you can apply
33:27to separate high probability aut blocks
33:29from the low quality ones in this
33:32scenario since the price is at a
33:34discount valuation and since it filled
33:36the imbalance we can look for long
33:38trading setups while keeping our stop-
33:40loss below the UT block area if you are
33:43more risk covers then you can even set
33:45your stop loss somewhere below the
33:47imbalance Zone all the minor swing highs
33:49will be our minor targets but one major
33:52Target will be the previously formed
33:54higher high you can see how the price
33:56moved higher now let us look at a
33:58bearish scenario this is a 1H hour time
34:01frame chart here you can see how the
34:03price reacted from the previous lower
34:05low level but it failed to break below
34:07it but after a slight pullback price
34:10managed to break and close below the
34:12major swing low thereby forming a valid
34:15bearish breakup structure once the
34:17breakup structure is confirmed the next
34:19step is to find a proper inducement
34:22usually inducement is the high of the
34:24first minor pullback after bearish break
34:27of structure but here price moved
34:29upwards there is no inducement to be
34:32found lower in such cases inducement
34:35level becomes the high of the last minor
34:37pullback before the structure break I
34:40will mark this level and you can observe
34:42how the price return to absorb the
34:43liquidity above the inducement once the
34:46inducement sweep is confirmed we can
34:48establish the lowest price point before
34:50the inducement grab as our lower low in
34:53addition we can expect the market to
34:55reverse from any liquidity zones and
34:57continue to decline lower this also give
35:00us a go-ahead signal to Mark our order
35:02blocks let us start from the highest
35:04point of the impulse move that generated
35:07the structure Break by definition a
35:09bearish order block is the last buying
35:11candle before the sell in addition to
35:13this it needs to sweep the liquidity
35:15above the minor highs and it should also
35:18be associated with an imbalance now this
35:20is the last buying candle but it has not
35:23swept the liquidity it was this bearish
35:25candle that has actually taken out the
35:27liquidity above the previous Minor High
35:29there is also an imbalance between the
35:31first red candle and the third candle
35:33above all this imbalance is unmitigated
35:37now if we Mark the orderflow we can see
35:39that it is also unmitigated therefore we
35:42can mark the high and low of this first
35:44bearish candle as our valid bearish
35:46order block this is a high probability
35:49extreme order block now we will see if
35:51there is another order block available
35:53if you look at this particular candle
35:55you can notice how it has taken out the
35:57previous minor highs it is also
35:59associated with an imbalance which is
36:01unmitigated so this green candle can be
36:03our second order block we can Mark its
36:06highs and lows so it becomes our
36:08decisional order block we can also Mark
36:11the order flow for additional filtering
36:13we can find that the order flow is also
36:16unmitigated but keep in mind that the
36:18extreme order block has a higher
36:20probability of success than the
36:22decisional order block now let's see how
36:24the price reacted first the price moved
36:27higher mitigated the imbalance and
36:29tested the decisional order block but it
36:32did not reverse instead the price moved
36:35upwards first mitigating the
36:37inefficiency there then the price moved
36:39into the order block but instead of just
36:41testing this extreme order block price
36:44break through the order block during
36:46such an instance most Market
36:48participants would expect a change of
36:50character but someone who knows deeply
36:52about liquidity and manipulation they
36:54would wait for the price action to
36:56complete and as expected the price did
36:58not break and close above the previous
37:01swing High instead it was sweeping the
37:03external liquidity available above this
37:05major swing High which is none other
37:08than retail stop- losses and breakout
37:10limit orders now the market absorbed the
37:12liquidity and close below our extreme
37:15order block so this order block is still
37:17valid the Traders can look for short
37:20trades from within the order block and
37:22they can set the stop loss above the
37:24order block or they can even place the
37:26stop loss above the Weck of the
37:28manipulation candle this is a good
37:30location to sell because we are shorting
37:32at a premium valuation all the previous
37:35minor lows are potential Target levels
37:38but the major takeprofit level will be a
37:40previous lower low level so that is all
37:43you need to know about order blogs and
37:45Order flows and if you have come this
37:47far thank you for watching this video I
37:50hope you found this video informative if
37:52it was useful please make sure to like
37:55and share this video with your friends
37:56and fellow Traders also don't forget to
37:59hit the Subscribe button and turn on the
38:01notifications to stay updated on our
38:04latest videos we value your feedbacks
38:06and suggestions and let us know what
38:08topics you wouldd like us to cover in
38:10our future videos I appreciate your
38:12support and I look forward to seeing you
38:14in the next episode till then see you

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