In smart money concepts (SMC), an order block is the last opposite candle before a strong move that breaks market structure. The idea is that large participants placed orders there, and price often reacts when it comes back. Stripped of the jargon, it is a precise way to mark a supply or demand zone.
Identifying a bullish order block
- Find a strong upward move that breaks a previous swing high (a break of structure).
- Mark the last bearish candle before that move started.
- The order block spans that candle's range (some traders use only the body).
- It is stronger if the move left an imbalance (a fair value gap) behind.
Trading it
- Wait for price to return to the order block.
- Enter at the top of the block, or on a lower-timeframe confirmation inside it.
- Stop below the block's low.
- Target the next liquidity pool: a previous high or an equal-highs area.
Filters that matter
- Trade order blocks in the direction of the higher-timeframe structure.
- Prefer blocks that have not been revisited.
- Ignore blocks in the middle of a range: they need context.
Honest limitations
Order blocks are subjective: two traders will often mark different blocks. Backtest your exact definition on at least 50 examples before trusting it in a challenge.