I recently reorganized my understanding of order blocks, and I really feel like they’re a truly important concept. They’re a highly practical tool for understanding supply and demand.

In simple terms, an order block is the candlestick right before a major price move. Whether you’re doing reversal trading or continuation trading, it’s extremely useful for finding entry points. The key is identifying the final bearish or bullish candlestick that appears just before support or resistance levels.

There are two types. One is the bullish order block (BuOB). This is a bearish candlestick that forms near a support level during an uptrend, before the price rises. The other is the bearish order block (BeOB), which is a bullish candlestick before the price falls—appearing near a resistance level during a downtrend.

In terms of how to use them in practice: for a BuOB, once a strong bullish candlestick follows (often referred to as a bearish engulfing candle), that becomes an entry opportunity. Conversely, for a BeOB, if a strong bearish candlestick keeps going, that’s a sell signal. This is where you decide the entry, stop loss, and take profit levels.

That said, to use order blocks effectively, you need to fully understand market structure. If you have foundational knowledge of Dow Theory or market structure, the accuracy of identifying order blocks will improve significantly.

To sum up, order blocks are a powerful way to view supply-and-demand zones. When price reaches a bullish order block in an uptrend, you buy; when price reaches a bearish order block in a downtrend, you sell—using this simple rule. It’s easy to understand and a practical technique.

This is for reference only and not investment advice. Learn more deeply on your own and try applying it based on your own trading style.