Overview
This lesson covers institutional order flow, focusing on how large market participants seek liquidity on higher timeframes, and how to identify these key levels for trading using order blocks and price action on monthly, weekly, and daily charts.
Institutional Order Flow Concepts
- Institutional order flow refers to how large funds and banks move price by seeking liquidity at key price levels.
- The market targets areas with the highest liquidity, often found at previous highs/lows and order blocks.
- Liquidity is mainly pooled below candle bodies, not wicks, as bodies represent institutional volume.
- Price "runs stops" (clears out stop-loss orders) below/above major lows/highs, then reverses or continues after absorbing liquidity.
Order Blocks and Liquidity Voids
- Order blocks are up/down candles before a strong move in the opposite direction, marking where institutions have traded.
- Bullish order blocks are last down candles before an up move; bearish order blocks are last up candles before a down move.
- Liquidity voids occur when price moves quickly away, leaving gaps that are typically revisited later for rebalancing.
Candle Analysis and Chart Timeframes
- Focus analysis on candle bodies, not wicks, as bodies show actual institutional trading levels.
- Monthly and weekly charts reveal where institutional liquidity resides; daily charts show entries triggered by these levels.
- Daily price action aligns with institutional order flow seen on higher timeframes.
Practical Application
- Map monthly and weekly institutional order flow to identify bullish or bearish conditions.
- Use daily chart to pinpoint price reactions at higher timeframe order blocks or liquidity zones.
- Anticipate price to run stops or revisit order blocks for potential trades.
Market Structure and Trade Execution
- Price alternates between bullish and bearish institutional order flow depending on which order blocks or liquidity levels are in play.
- After absorbing liquidity, price often retraces to mitigate previous positions (e.g., cover shorts or unwind longs).
- Recognize repeated market patterns: consolidation, accumulation, run on stops, and return to order blocks.
Key Terms & Definitions
- Institutional Order Flow — Movement of market price directed by large financial institutions seeking liquidity.
- Order Block — A candle (or group) marking where institutions initiated trades before a major reversal.
- Liquidity Void — Gaps left by rapid moves, later filled when price returns.
- Mitigation Block — A price level where previous institutional positions are closed or reduced.
- Breaker — A former support/resistance or order block that, once broken, becomes the opposite type (support becomes resistance, etc.).
Action Items / Next Steps
- Practice identifying order blocks and liquidity zones on monthly and weekly charts.
- Mark these levels on daily charts and observe price reactions.
- Review previous lessons for foundational concepts.
- Prepare specific questions on order flow or chart reading for the next class.