Order Blocks

Order Blocks Trading

A candle-zone heuristic conventionally defined before a displacement and structure break. OHLC data cannot establish that institutional orders remain there or caused a later reaction.

Identification

Bullish Order Block

1. Find the last bearish candle before a strong upward move
2. The move must break previous structure (higher high)
3. Zone = open to low of that bearish candle

Bearish Order Block

1. Find the last bullish candle before a strong downward move
2. The move must break previous structure (lower low)
3. Zone = open to high of that bullish candle

Validation

• Displacement: normalize return/range by ATR and elapsed bars
• Break of Structure: use an objective pivot and closed-bar buffer
• Retest count/age: record continuously and test first versus later returns
• Context state: define higher timeframe objectively and test its incremental value

Workflow

1. Identify the zone with fixed timeframe, OHLC boundary, pivot, and displacement rules
2. Get candle data around the zone:

   get_candles_around_date(symbol=<symbol>, exchange=<exchange>, interval=<interval>, date=<date>)
   

3. Mark the zone using draw_chart_analysis with type demand (bullish) or supply (bearish)
4. Wait for price to return to the order block zone
5. Confirm entry with LTF structure shift, rejection wicks, or volume increase
6. Stop loss below/above the order block
7. Target next opposing order block or liquidity level

Evidence and Validation

• Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
• Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
• Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
• Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
• Research basis: Treat an order block as a reproducible candle-zone heuristic, not proof of unfilled institutional orders. Order-flow research relates price impact to observable imbalance and market depth.

Key Rules

• Do not describe the zone as unfilled institutional inventory without order-level evidence.
• Test first and later retests with an expiry rule; keep failures in the sample.
• Define context and entry confirmation before evaluation and use closed bars.
• Quantify displacement in normalized units rather than a universal candle count.

Related Skills

• fair-value-gaps — test overlap between two explicitly defined candle-zone conventions
• market-structure-shift — BOS/CHoCH confirms the displacement that validates an OB