Lecture on Order Blocks in Trading

Overview

• Importance of order blocks in trading
• Backtesting 100+ order blocks
• Identifying high-quality order blocks
• Backtesting results and effective trading conditions

Introduction to Order Blocks

• Order blocks: interesting areas for trading opportunities
• Importance of certain conditions for order blocks to work
• Explanation of primary order block rules

Primary Rules for Identifying Order Blocks

1. Inefficiency Creation
   • Drastic moves creating gaps between shadows
2. Break of Structure or Change of Character
   • Market signals for continuation or reversal
3. Unmitigated Order Blocks
   • One-time use; only trade on first price tap

Trading Setup for Backtesting

• Identify a valid order block
• Place order at the beginning of the order block zone
• Stop loss at the end of the order block
• Target: 2x stop loss range for profits
• Backtesting done on EUR/USD, 1-hour timeframe

Backtesting Results

• 100 order blocks tested
  • 28 not triggered
  • 41 losing trades
  • 31 winning trades
• Win rate: 43%
• Account size increase: 47%

Conditions for High-Probability Order Blocks

1. Market Structure
   • Gaps and liquidity grabs
   • Examples of valid order blocks
2. Market Volatility and Spread
   • High volatility days (midweek)
   • Importance of spread
3. Market Trend and Freshness
   • Higher success in trending markets
   • Fresh order blocks more effective
4. Confirmations in Lower Time Frames
   • Use of lower time frames for confirmation
   • Common price action setups

Common Market Structure Patterns

1. Gap and Lower Order Block
   • High chance of price filling the gap
2. Liquidity Grab Under Equal Lows/Highs
   • Support and price continuation
3. Support and Liquidity Grab
   • Price grabbing liquidity under equal lows

Real Chart Examples

• Examples on EUR/USD 1-hour timeframe
• Highlighting gaps, liquidity, and order blocks

Factors Influencing Order Blocks Success

1. Market Volatility and Spread
   • Midweek success, high volatility sessions
2. Market Trend and Freshness
   • Trending markets, recent order blocks
3. Confirmation in Lower Time Frames
   • Entry reasons in lower time frames

Patterns for Confirmations

1. Change of Character with Inefficiency
   • Orders placed above valid order blocks
   • Stop loss below the lowest point
2. Change of Character with Retracement Levels
   • Using 61.8% and 78.6% retracement levels

Conclusion

• Importance of backtesting and strategy development
• Encouragement to subscribe and engage