An order block is the last opposite-coloured candle before a strong move. Before a strong move up, it's the last down candle. Before a strong move down, it's the last up candle. The idea is that large orders were placed in that area, and price may react when it comes back.
How to mark a bullish order block
- 1Find a strong move up that breaks structure.
- 2Go back to the last down candle right before that move started.
- 3Mark its range, from high to low (some traders use only the body).
- 4Wait for price to return to that zone before looking for a buy.
Order blocks vs fair value gaps
They often sit right next to each other: the order block is where the move started, and the FVG is the gap the move left behind. Many traders use the FVG as the first entry zone and the order block as the area that should hold if the idea is right.
- Stronger: it caused a break of structure, after a liquidity sweep.
- Weaker: it's in the middle of a range, or price has already returned to it several times.
Order blocks are zones, not exact prices. Always define where you're wrong with a stop loss before you enter.