Chapter 2 lesson 3 - Order blocks

Question 1

How to identify a valid order block?

Answer 1

In order for an order block to be valid, there must be:
1. There must be a liquidity sweep
2. There must be a break of market structure
3. There must be an imbalance
4. It must line up with a higher time frame point of interest

The series of up close or down close candles that swept liquidity is the order block.

When price retraces back to the order block, you can use the candle open or mid point to enter a trade.

Question 2

Does the size of the body matter?

Answer 2

Order block candles with large bodies and small wicks are generally high probability order blocks. The opening price should be used as a point of interest.
Order block candles with small bodies and large wicks are generally low probability order blocks. The wick to the opening price should be used as a point of interest.

Question 3

When should you use low probability order blocks?

Answer 3

Low probability order blocks are best used in a down or up trend where it is the only down or up close candle. It is used to determine whether the trend will continue.

Question 4

What is the mean threshold of an order block?

Answer 4

It’s the mid point between the opening and close of a candle. The mean threshold can used as an entry point, especially when the order block consists of a number of candles. The benefit using the mean threshold is that the stop loss will be smaller.

Question 5

Where should you place your stop loss?

Answer 5

The stop loss should be placed near the low or high of the order block.

Question 6

What is an order block?

Answer 6

A bullish order block is the lowest down close candle before bullish displacement.
A bearish order block is the highest up close candle before bearish displacement.