Order block trading: how to find and trade order blocks

What an order block is

In Smart Money Concepts, an order block (OB) is the last opposite-coloured candle before a strong move that breaks market structure:

• Bullish order block: the last down candle before a strong move up.
• Bearish order block: the last up candle before a strong move down.

The theory is that large traders could not fill their whole order in one go. They built the position in that candle, drove price away, and may defend the zone when price returns.

How to identify a valid order block

1. Strong displacement away from it, ideally leaving a fair value gap.
2. A break of structure caused by that move. Without a break, the candle is just a candle.
3. Unmitigated: price has not returned to it since.
4. Location: bullish OBs below current price in an uptrend, ideally after a liquidity sweep of a prior low.

Traders draw the zone from the candle’s high to its low, or more tightly from its open to its extreme.

How to trade an order block retest

1. Mark the order block after the structure break.
2. Wait for price to return to the zone. Don’t chase the original move.
3. Look for a reaction: a rejection candle, or a lower-timeframe change of character in your direction.
4. Stop beyond the far side of the order block.
5. Target the next swing high or low, where liquidity sits.

Order blocks vs breaker blocks

If price closes through an order block instead of respecting it, the block has failed. When that failed block is later retested from the other side and holds, traders call it a breaker block: support that has become resistance, or the reverse.

Common mistakes

• Marking every opposite candle as an order block. Without displacement and a structure break, most are not.
• Trading blocks against the higher-timeframe trend.
• Using old, already-tested blocks. Each retest weakens a zone.

Scanning for order block retests

See the Smart Money Concepts scanner for structure, FVG and sweep conditions.

Frequently asked questions