Order Block Detection

Notes:

These indicators and concepts are specifically designed for TradingView.com

This concept of Order Blocks is crucial to our course on Smart Money Concepts which are found in the Tools. This is merely an introductory preamble.

Indicator:

Go into INDICATORS and type in Order Block Detector

Order Block Detector in indicators

How to use the detector

You can use the Order Block Detector as a way to see where price is likely to react off of due to the big volumes of buy or sell orders. You use these as logical areas of support and resistance. The green order blocks are logical supports and the red order blocks are logical resistance. So if price hits a green order block we can expect a bounce to the upside and if it hits a red order block we can expect the price to have a hard time breaking above that red order block and going to the downside.

When price hits an order block they act as support or resistance (highlighted in pink)

How does the Order Block Detector work?

An Order Block Detector is a technical analysis tool used to identify areas where large traders (institutions or banks) have entered the market with significant buy or sell orders, creating areas of support or resistance.

The Order Block Detector works by analyzing price action and volume to identify areas where large orders were likely executed. It then marks those areas on the chart to help traders identify potential levels of support or resistance.

To use the Order Block Detector in trading, traders may look for a few key signals:

• When price approaches an identified Order Block, it may act as a level of support or resistance, as large traders may have significant open positions at that level.
• Traders may look for price rejection or consolidation around an Order Block as a potential trading opportunity.
• Traders may also use Order Blocks in conjunction with other technical analysis tools, such as trend lines or moving averages, to confirm potential trade setups.

Order Blocks can be identified using a variety of methods, including analyzing volume profile or using specific software tools that scan the market for large orders. Once identified, the Order Block can be marked on the chart using horizontal lines or other visual indicators.

In Lehmans Terms: The spots marked on the graph can act like invisible walls that the stock will bounce off of.

How to find Order Blocks

‍

Order blocks are a popular trading concept used by technical analysts to identify potential areas of support and resistance on a price chart. They are essentially areas of price consolidation or accumulation where large market players, such as institutional traders or banks, have placed significant buy or sell orders.

To plot an order block, you need to look for an area of price consolidation on the chart. The key characteristics of an order block include:

1. Tight Price Range: The price range within the order block should be relatively narrow compared to the price range outside of the block. This indicates that the market has reached a point of equilibrium, where buyers and sellers are equally matched in terms of their willingness to buy or sell the asset.
2. Low Volume: The trading volume within the order block should be relatively low compared to the volume outside of the block. This indicates that there is less participation from market participants in this area, further suggesting that the market is at a point of equilibrium.
3. Sideways Price Action: The price within the order block should be moving mostly sideways, with little or no trend. This suggests that market participants are waiting for a catalyst to move the market in a particular direction.

Once you have identified an area of consolidation that meets these criteria, you can then plot the order block by drawing a rectangle or box around the area. The order block should cover the entire area of consolidation, from the first point where the price began to consolidate to the last point where the price broke out of the consolidation phase.

It's important to note that order blocks can be plotted on any timeframe, including daily, weekly, and monthly charts. The timeframe you choose will depend on your trading strategy and goals.

To further refine your order block analysis, you can look for additional confirmation signals such as:

1. Volume Profile: You can use a volume profile indicator to identify the volume of trades that took place at each price level within the order block. This can help you determine the most significant price levels and potential support and resistance levels.
2. Candlestick Patterns: You can look for candlestick patterns within the order block that suggest a shift in market sentiment, such as bullish engulfing patterns or bearish harami patterns.
3. Price Action: You can analyze the price action within the order block to identify potential trend reversals or breakouts. For example, if the price begins to break out of the order block to the upside, it could be a signal that buyers are starting to gain control and that the market could be poised for a bullish move.

‍