I've noticed that many people in trading have heard of order blocks, but few truly understand how they work. Let's figure it out together.

An order block is essentially a zone on the chart where major players—banks, institutions, market makers—place their positions. When I look at the chart, I look for areas where sharp price movements occurred. Usually, before such an upward or downward impulse, there is one or more candles that go against the main trend. That is what an order block is.

There are two main types. A bullish order block is formed where buyers started accumulating positions before a strong rise. When the price later returns to this zone, it often bounces back up from it. A bearish order block, on the other hand, is a zone where sellers started short positions before a decline. If the price returns here, it may fall further.

How do I use this in trading? First, order blocks help me find good entry points. The price returns to such a zone, providing an opportunity to enter with low risk. Second, I place stop-losses just outside these zones. These are clear levels that the market respects.

But there are more complex variations. An engulfed order block is when the price breaks through such a zone and continues moving further. This can indicate that the market structure has changed and the trend has reversed. Interestingly, an engulfed bullish order block can later become resistance, and an engulfed bearish order block can become support.

There’s also the breaker block. This is when the price breaks a level, seemingly taking liquidity under retail traders’ stop orders, and then sharply reverses in the opposite direction. It looks like a false breakout, but in reality, it’s often manipulation by large players. After such a reversal, the broken level becomes a new support or resistance.

When I analyze order blocks, I pay attention to several signs. Decreasing volume as the price approaches the zone is a good signal. I also look at consolidation before an impulse and clear levels that the price consistently respects. This helps me better understand where big players are accumulating or distributing positions.

The main idea is to trade alongside large players, not against them. An order block is like a map showing where they were active. If you learn to read this map, your trading will become much more meaningful. It’s not magic; it’s just analyzing market structure.