Order Block (OB): Institutional Order Blocks

Order Block (OB) is an area that records the accumulation or distribution of extremely large transaction volumes of Smart Money (banking institutions, financial funds) before they move prices. These are often the most solid price support points when the market regression returns.

1. Advanced Order Block Definition & Classification

In ICT theory, an Order Block is not simply a green/red candle reversal but an area containing a large order matching footprint:

• Bullish Order Block: Is the last bearish candle before a strong price increase breaks the old top structure (BOS or MSS). This is where Smart Money consolidates the Buy position and leaves the Sell Limit orders stuck.
• Bearish Order Block: Is the last bullish candle before a strong price decline breaks the old bottom structure (BOS or MSS). This is where institutions match Sell positions and block Buy orders.

2. Important Value Ranges of an Order Block

When measuring an OB on the chart to find an entry point, traders need to pay attention to 3 important milestones:

• Upper Boundary / Lower Boundary (High / Low): The maximum extension point of the entire candle creates OB (including the wick). This is the earliest reaction area.
• Opening the candle body (Open Price): Opening price of OB candle. This mark has an extremely high probability of reaction and is the most popular entry point for professional traders.
• Mean Threshold (MT 50%): The 50% middle point is calculated from the opening price to the lowest/highest price of the OB candle body (or the entire candle as the case may be).
  💡 Decisive candle body rule: In the IPDA algorithm, the 50% Mean Threshold level is the final stop. If the candle body of the retracement period **closes beyond 50% Mean Threshold**, that OB block is considered to have weakened or failed (SL is threatened).

3. Criteria for Determining Order Blocks with High Winning Probability

⭐ IMPORTANT NOTE: Not every opposite candlestick creates a strong OB. A high quality OB must meet the following 3 factors:

1. Liquidity Sweep: The OB candle must be the old top/bottom sweep (Stop Hunt) before reversing. This ensures that Smart Money has cleared retail items and collected enough goods.
2. Displacement: The rhythm immediately following the OB candlestick must be long, decisive candlesticks and **must leave an FVG gap** right next to it. Without accompanying FVG, that OB has very low reliability.
3. Compatible Premium / Discount: Only buy at Bullish OB when it is in the Discount zone (below 50% of the price range) and only sell at Bearish OB when it is in the Premium zone (over 50% of the price range).

4. Low-Quality OB Warning

• Mitigated OB: When the price returned to retest OB many times, the stuck orders of large cash flow were completely cleared. That OB will lose strength and be easily punctured.
• OB does not generate FVG (No Imbalance): The gap behind FVG is evidence of the rapid movement of large cash flows. OB without FVG indicates weak thrust or lack of organizational consensus.
• OB goes against the multi-frame trend: A Bullish OB on the 15m frame will quickly fail if the H4/D1 frame trend is strongly bearish and the price is at the Premium of the large frame.