What are Order Blocks? — ICT Concept Explained

What is an Order Block?

An order block is an area on the chart where institutional market participants (Smart Money) have placed large orders. These zones are particularly important because price frequently returns to these areas before continuing its movement.

How to Identify an Order Block

In the ICT concept, an order block is typically defined as the last opposing candle before a strong impulse move:

• Bullish Order Block: The last bearish (red) candle before a strong upward movement
• Bearish Order Block: The last bullish (green) candle before a strong downward movement

Why Do Order Blocks Work?

Institutional traders cannot place their large positions all at once. They distribute their orders across multiple price levels. When price returns to an order block, the remaining orders are executed — which drives price in the same direction again.

Practical Tips

1. Consider the timeframe: Order blocks on higher timeframes (4H, Daily) are stronger
2. Analyze context: An order block works best in the direction of the higher timeframe trend
3. Mitigation: An order block that has already been tapped is "mitigated" and loses strength
4. Fair Value Gap: Order blocks combined with FVGs provide especially strong setups