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Order Blocks identifies the last opposing candle before a significant price move — zones where institutional participants are believed to have placed large orders. These zones frequently act as future support and resistance because institutions often defend their entry levels. When price returns to an order block, it provides a potential entry opportunity aligned with the “smart money” direction.

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How Order Blocks Form

An Order Block is defined by a specific candle pattern:
  • Bullish Order Block: The last bearish candle before a strong bullish move. Institutions were accumulating buy orders during this candle, absorbing selling pressure before launching price higher.
  • Bearish Order Block: The last bullish candle before a strong bearish move. Institutions were distributing sell orders during this candle, absorbing buying pressure before pushing price lower.
The zone spans from the candle’s low to its high (the full range of the order block candle).
Order Blocks with a Break of Structure (BOS) confirmation are the highest quality. When requireBos is enabled, the indicator only marks OBs that led to an actual structural break, filtering out false patterns.

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Detection Settings

These parameters control how Order Blocks are identified.
When requireBos is enabled, the Order Blocks indicator depends on internal swing detection logic similar to the Market Structure indicator. The breakDetection setting here works identically — close mode is more conservative and filters false breaks.

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Display Settings

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Zone Appearance

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Invalidated Zones

When price breaks through an order block in the opposing direction, the zone is considered invalidated. It no longer represents a defended institutional level.

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Midline

The midline (50% of the order block) is considered the optimal entry point in SMC theory. Institutions often place the bulk of their orders at the center of the block, making the midline the most common reaction point.

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Alert Settings

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Alert Events

Configure alert sounds and notifications in the global Alerts settings panel.

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Order Block Quality

Not all order blocks are equal. Several factors determine the quality and reliability of an OB:

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Quality Factors

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Discount and Premium Zones

In SMC theory, the most effective order blocks are located in:
  • Discount zone (below 50% of the range): Bullish OBs in the discount zone offer the best risk-to-reward for longs.
  • Premium zone (above 50% of the range): Bearish OBs in the premium zone offer the best risk-to-reward for shorts.

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Practical Usage

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Classic SMC Entry Model

The standard SMC entry using order blocks follows this sequence:
  1. Identify the trend using Market Structure (series of BOS in one direction).
  2. Wait for a pullback toward an order block.
  3. Confirm the OB is valid (BOS-confirmed, unfilled, in discount/premium zone).
  4. Enter at the midline of the OB with a stop-loss below/above the OB boundary.
  5. Target the next structural level or opposing OB.

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Confluence Setups

Order blocks are most powerful when they align with other tools:
  • FVG + Order Block: When an FVG overlaps with an OB, the zone has both price inefficiency and institutional positioning — a high-probability setup.
  • Volume Profile: An OB at a high-volume node (HVN) or POC confirms that significant volume was transacted at this level.
  • Absorption Alpha: Absorption signals at an order block on the retest confirm that institutions are still defending the level.
  • Stacked Imbalance: Imbalance patterns within the OB candle’s footprint provide structural confirmation of one-sided institutional activity.

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Common Pitfalls

  • Trading every OB: Without requireBos, the indicator will detect many marginal order blocks. Keep the BOS filter enabled for quality signals.
  • Ignoring invalidation: Once an OB is broken (invalidated), it becomes resistance if it was support and vice versa. Do not continue to trade it as the original direction.
  • No stop-loss discipline: The OB boundary is the natural stop-loss level. If price breaks through the entire zone, the thesis is invalidated.
  • Using OBs against higher timeframe structure: A bullish OB on the 5m chart has little value if the 1H trend is bearish. Always align OB trades with at least one higher timeframe’s direction.
Order blocks are zones, not exact prices. Price may react anywhere within the zone — at the top, midline, or bottom. Use limit orders with a stop beyond the zone boundary rather than market orders at a single price.