MMXM Mentorship Episode 8: Order Blocks

Understanding Order Blocks in Trading

Characteristics of Order Blocks

• Order blocks are significant price levels where buying or selling pressure is concentrated, forming at key liquidity pools.

• Bullish order blocks typically form below a short-term low liquidity pool, while bearish order blocks form above a high liquidity pool.

• These order blocks act as support or resistance, guiding price action towards higher or lower liquidity draws.

Time Frame Alignments

• Different time frame alignments for order blocks include monthly to daily, weekly to 4-hour, and down to 5-minute charts.

• The alignment helps traders identify potential entry points based on the structure of previous price actions.

Practical Examples with Charts

• Analyzing the USD/CAD weekly chart reveals buy stops being rated before a downward movement into an imbalance.

• A confirmed bearish order block occurs after taking out buy stops and breaking structure lower.

Identifying High Probability Order Blocks

• Traders should look for high probability order blocks that rate liquidity and break structure afterward.

• A bullish up-close candle can indicate a valid high probability order block if it forms near key levels.

Inducement and Kill Zones

• Inducement order blocks occur when price appears bullish but reverses after rating highs; they often have long wicks indicating rejection.

• Timing is crucial; engaging during specific kill zones (e.g., London Kill Zone, New York Kill Zone) enhances the effectiveness of these strategies.