Recently, I’ve been discussing technical analysis with some traders and found that many people still have a bit of confusion about the concept of Order Blocks. Actually, this thing looks complicated, but once you understand it, it’s especially useful.

Simply put, an OB is another way to represent supply-and-demand zones. In my view, the key to mastering order block trading is to identify those critical areas that can trigger strong price reversals. More specifically, it is the final bearish candle or bullish candle near a support or resistance level, appearing just before the price is about to make a major move. The logic of this setup is very clear—once you’ve figured it out, you can use it to look for opportunities for reversal entries or continuation entries.

I divide OBs into two categories: bullish OBs and bearish OBs. A bullish OB is the last selling (bearish) candle near a support level, and then the price starts to rise—in this case, we’ll see a strong bullish engulfing pattern. Conversely, a bearish OB is the last buying (bullish) candle near a resistance level; immediately after that, the price falls, accompanied by a bearish engulfing pattern.

When trading, I buy bullish OBs in an uptrend and sell bearish OBs in a downtrend. The logic for setting your entry, stop-loss, and take-profit is the same framework. But there’s one key point here—knowing when you should trade OBs and when you shouldn’t touch them requires a complete understanding of market structure. If you haven’t fully grasped market structure and Dow Theory yet, I suggest first filling in that knowledge, so you can apply order block trading with more confidence.

Honestly, OB is an extremely important concept that’s also easy to understand. At its core, it’s a strong supply-and-demand zone. Once you master the identification method, your entry success rate will improve significantly. These are all technical ideas that have been validated by the market, but in the end, you still need to practice and adjust on your own to find a trading approach that suits you.