Institutional footprints.
- Supply Block: The last up-close candle before a sharp move down.
- Demand Block: The last down-close candle before a sharp move up.
- Displacement: The move away from the block must be fast and strong.
How to mark the zone.
To mark an order block, identify the candle that preceded the 'break of structure.' Draw a box from the candle's high to its low (including wicks). This zone is your area of interest.
A 'refined' order block uses just the body of the candle, allowing for a tighter stop loss, though it increases the risk of price missing your entry.
The entry model.
Don't chase the move. Once the displacement happens, wait for price to return (retrace) into the order block zone. This is known as mitigation.
The most conservative entry is at the 'mean threshold' (the 50% mark) of the order block, providing an exceptional reward-to-risk ratio.
Risk management at the edge.
The beauty of order blocks is the clear exit. If price closes significantly past the block, the institutional thesis is likely invalidated. This allows you to set tight stops.
On a 0,000 MixFunded account, an order block trade might only require a 10-pip stop. This allows you to trade with meaningful size while keeping the total dollar risk under your 3% daily drawdown threshold.