Advanced Order Block Trading Strategy: Unveiling the Best Techniques

Introduction

Welcome to the Smart Risk trading system, where we base our strategies on the footsteps of smart capital in the market. In this article, we will explore an advanced trading strategy called the Order Block. This strategy will completely blow your mind and revolutionize your trading approach. But before we dive into the details, make sure to subscribe to our YouTube channel and watch our videos for a comprehensive understanding of smart money concepts.

Understanding Smart Money Concepts

To fully grasp the Order Block strategy, it’s essential to familiarize yourself with some smart money concepts. These concepts include order blocks, break of structure, and change of character. Order blocks are optimized demand and supply zones that form when a large amount of money enters the market, resulting in a significant move. They represent an imbalance between buyers and sellers.

Break of structure refers to a trending market with a series of higher highs and higher lows. Breaking the latest higher high to the upside indicates the market’s intention to continue upward, while breaking the recent higher low to the downside indicates a change in direction.

The Order Block Strategy

The Order Block strategy consists of two steps: analyzing the market structure and identifying order blocks in the higher time frame, and then zooming in on a lower time frame to wait for a change of character and look for order block entries.

For example, if we analyze the market in the four-hour time frame and identify order blocks, we then zoom in on the 15-minute time frame to find potential trading opportunities. The entry time frame should be at least two times lower than the analysis time frame.

Executing the Order Block Strategy

To execute the Order Block strategy, follow these steps:

1. Analyze the market structure in the higher time frame and identify order blocks.
2. Zoom in on the entry time frame and wait for a change of character to appear.
3. Once a change of character is confirmed, look for new order blocks to place trades.
4. Place your order a spread size above the order block, with a stop loss a few pips below the lowest point of the zone.
5. Consider closing half of your position when the price reaches a 1:2 risk-reward ratio.
6. For the second take profit, target the next level of structure in the higher time frame or trail your stop loss to lock in profits.

Additional Considerations

While executing the Order Block strategy, keep the following points in mind:

– You can look for further entries as the market continues to move in your favor, placing new orders with lower risk.
– Ensure that your position size for subsequent trades is half the size of the initial trade.
– Avoid having more than three trades open for the same analysis on a pair.
– If you have a small account, consider risking 2% for the first trade and 1% for the second and third trades.
– Test the strategy on different currency pairs to find the best pairs for this approach.
– Implement a proper risk management plan to protect your capital during volatile market conditions.

Examples of the Order Block Strategy

Let’s look at a couple of trade examples to better understand how the Order Block strategy works.

Example 1: New Zealand Dollar (NZD/USD)
– Analyze the market structure in the four-hour time frame and identify an order block.
– Zoom in on the 15-minute time frame and wait for a change of character.
– Once the change of character is confirmed, identify new order blocks for potential trades.
– Place your order above the order block and set a stop loss below the lowest point of the zone.
– Consider closing half of your position at a 1:2 risk-reward ratio.
– Trail your stop loss or target the next level of structure for the second take profit.

Example 2: Euro Dollar (EUR/USD)
– Analyze the market structure in the one-hour time frame and identify an order block.
– Zoom in on the five-minute time frame and wait for a change of character.
– Once the change of character is confirmed, mark the new order block for potential trades.
– Place your sell order and set a wider stop loss since you are an early seller.
– If the market creates a new order block, consider placing another trade with reduced risk.

Frequently Asked Questions

1. How do I determine the appropriate time frame for analysis and entry?

To determine the appropriate time frame, analyze the market structure in a higher time frame and then zoom in on a lower time frame for entry. The entry time frame should be at least two times lower than the analysis time frame.

2. Can I apply the Order Block strategy to any currency pair?

Yes, the Order Block strategy can be applied to any currency pair. However, it’s recommended to test the strategy on different pairs to find the ones that work best with this approach.

3. How many trades can I have open for the same analysis on a pair?

It’s advisable to avoid having more than three trades open for the same analysis on a pair. This helps manage risk and prevents overexposure to a single trade.

4. What should I do if there are no order blocks in the lower time frame?

If you cannot identify any order blocks in the lower time frame, you can enter the market with retracement levels. Use Fibonacci retracement and place your order in the middle of the 61.8% and 78.6% levels. Adjust your stop loss accordingly.

5. How important is risk management in executing the Order Block strategy?

Risk management is crucial in any trading strategy, including the Order Block strategy. Implement a proper risk management plan to protect your capital during volatile market conditions and ensure long-term success.

Conclusion

The Order Block strategy is an advanced trading approach that allows you to follow the footsteps of smart money in the market. By analyzing market structure, identifying order blocks, and waiting for a change of character, you can enter trades with high potential for success. Remember to test the strategy on different currency pairs, have a proper risk management plan, and always continue learning and adapting your trading approach.