What Is an Order Block? Identification and Rules

Three conditions filter out most of the noise. First, the candle must be the last opposing candle before the move. Second, the move away must be impulsive — a decisive expansion, not a slow drift. Third, that move must break structure, taking out a prior swing point.

Without the structure break you have a candle followed by a rally, which describes a large share of all candles. The break is what indicates that something changed rather than that price simply drifted.

Convention is to use the open and close of the order block candle as the zone, with the wick as an extended boundary. Some traders use the full candle range including wicks, which produces a wider zone with earlier entries and looser stops.

Whichever you choose, apply it consistently. Switching between definitions after the fact so that the zone always contains the current price is a way of never being wrong and never learning anything.

The setup is a return to an untested block in the direction of the higher-timeframe trend. Wait for price to enter the zone and show a reaction rather than entering on touch.

Invalidation is clean: a decisive close beyond the far side of the block means the orders that supposedly sit there did not defend it. That is a defined structural stop rather than an arbitrary distance.

The two concepts describe different parts of the same event. The order block is where the move began; the fair value gap is the imbalance the move left behind. They frequently sit adjacent to each other.

When a block and a gap overlap, the resulting zone is stronger than either alone, because two independent reasons for a reaction sit at the same price. Traders often prioritise these confluence areas and ignore isolated blocks entirely.