Order Blocks Part 2 - Lecture Notes

Introduction

• Lecture Topic: Order Blocks Part 2
• Day: 15 (skipped 13 due to superstition)
• Focus: Identifying order blocks within a chart, not trading strategies.

Recap: What Are Order Blocks?

• Definition: Price range where large orders are filled, changing price direction or causing market movement.
• Purpose: If price revisits this range and shows selling/buying pressure, it's likely to continue in that direction.
  • Bearish Order Block: Selling pressure implies downward movement.
  • Bullish Order Block: Buying pressure implies upward movement.

Identifying Order Blocks

• Location: Where large orders get filled; typically where liquidity lies.
• Combining Tools: Utilizing liquidity sweeps and break of structure to find order blocks.
• Concepts: Liquidity Sweeps and Break of Structure
  • Liquidity Sweep: Large orders filled above highs and below lows; often leads to change in market direction.
  • Break of Structure: Indicates that a liquidity sweep has happened, confirming the formation of an order block.

Process of Identification

1. Bearish Order Block (Downtrend):

   • Identify the leg up causing a liquidity sweep.
   • Confirm the sweep by a break of structure to the downside.
   • Define the order block as the price range of that leg up.
   • When revisited with selling pressure, price likely moves further down.

2. Bullish Order Block (Uptrend):

   • Identify the leg down causing a liquidity sweep.
   • Confirm the sweep by a break of structure to the upside.
   • Define the order block as the price range of that leg down.
   • When revisited with buying pressure, price likely moves higher.

Examples in Charts

Weekly Time Frame Example

• Bullish Setup:
  • Price moves up, sweeps highs in an uptrend.
  • Breaks structure downwards: Confirms sweep.
  • Define order block: Leg up's price range.
  • Revisits with selling pressure: Price continues lower.

Another Example

• Bearish Setup:
  • Price moves down, sweeps lows in a downtrend.
  • Breaks structure upwards: Confirms sweep.
  • Define order block: Leg down's price range.
  • Revisits with buying pressure: Price continues higher.
  • Applicable across all time frames and other tools.

Additional Chart Example

• Identify highs/lows, sweeps, and break of structure to find order blocks.
• Bullish Setup:
  • Move down, sweeps lows.
  • Breaks structure up: Confirms sweep.
  • Revisits with buying pressure: Price continues higher.

Practice and Application

• Draw out the order block structure to practice identification.
• Re-watch videos and revisit examples to reinforce understanding.

Conclusion

• Review the concepts and examples to understand order blocks better.
• Use the tools and techniques discussed for effective identification of order blocks in various time frames.