Order blocks
Lesson 07 · 8 min read · By DT Terminal
Mark a valid order block, from its open to its far wick, plus its mean threshold and its invalidation, and see how it differs from a supply or demand zone.
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The last opposite candle before displacement
An order block (OB) is one candle, picked out by a rule.
- Bullish order block. The last down-close candle before a displacement move up that breaks structure: a candle trades or closes through a prior swing high.
- Bearish order block. The last up-close candle before a displacement move down that breaks a prior swing low.
The story is that large traders left orders unfilled there, and price comes back to "mitigate" them. That is a story, not a measured fact.
Go deeper
It builds on the swings in Market structure the ICT way, the sweeps in Liquidity the ICT way and the gaps in Fair value gaps the ICT way.
ICT's early Core Content described the bullish block as the lowest down-close candle near support, confirmed when a later candle trades through its high. The version above is the one most traders, and Smart Money Concepts, use today.
The full story: large traders built positions there and left orders unfilled. No peer-reviewed study tests order blocks as ICT defines them. An order block is a candle that meets written conditions, nothing more.
Displacement makes the block
Displacement is a fast, wide-range, one-directional move away from the candle. It is what turns a candle into a block. A slow, overlapping drift away leaves an ordinary pullback candle, however it looks.
The common version needs displacement and a structure break caused by it. Most traders grade a block up when:
- a fair value gap sits directly after it;
- it formed just after a liquidity sweep;
- it sits in discount for a bullish block, or premium for a bearish one (Dealing ranges, premium, discount and OTE).
These are grades, not strict rules. Write down which ones your rule needs.
Go deeper
A strong displacement usually leaves a fair value gap. Premium and discount are read inside the current range. In most published versions all three are grades, not requirements.
Marking it: open, wick and mean threshold
The proximal line is the block's near edge, where price touches first on the way back. The distal line is the far edge, your invalidation side. Where you draw them is a choice:
| Marking | Bullish block | Trade-off |
|---|---|---|
| Body | Open to close | Tightest zone, more missed touches |
| Full range | High to low | Wider zone, more touches, invalidation at the far wick |
| Open to wick | Open to low (open to high for bearish) | ICT's common marking, and the one this lesson draws |
The mean threshold is the block's 50% level. ICT measures it on the body, halfway between open and close: if the block is going to hold, later candles should not close beyond it. Some educators halve the full range instead. Pick one and keep it.
Go deeper
When several down-close candles sit together, merge them or take the one nearest the move. Write that rule down too, and never switch from body to wick halfway through a trade to justify holding it.
Valid, not valid, mitigated and refined
Mark a block backward, from a displacement that has already printed, never forward. Then check it against these cases.
Order blocks
Bullish and bearish, valid against not valid
- Bullish block
- Bearish block
- Fair value gap
- The swing it breaks
Bullish order block
last down-close candle before a move up
Bearish order block
last up-close candle before a move down
With displacement
a gap left behind and a close through the swing
No displacement
just a pullback candle: not a block
Already mitigated
price has been back once; the next return ranks lower
Refined
the last down-close candle inside the wider area
- No displacement. No gap, no structure break: it is just a candle.
- Already mitigated. Price has been back once. The first touch is usually ranked highest.
- Closed through. A body close beyond the distal line ends the block. It may become a breaker, which is the next lesson.
- Refined. The last down-close candle on M15 inside an H4 block: a tighter zone and a smaller stop, but more missed fills.
Mark blocks bar by bar in the backtester
EURUSD M15 and mark each block as it forms. Replay hides the candles ahead, so you cannot mark in hindsight.Go deeper
Marking every last opposite candle, with no displacement behind it, is the most common mistake. After a close through, many traders watch the old block as a possible breaker.
A block marked on an H4 candle is unrefined. On M15 inside that candle, the last down-close candle is the refined block: a tighter zone and a smaller stop, at the cost of more missed fills and more false signals.
In the backtester, each time a candle closes through a swing with displacement, pause, mark the last opposite candle from its open to its wick, and note what price did on its first return to the mean threshold.
A block that points against the higher-timeframe draw on liquidity, or that formed without taking any liquidity, fails more often by most practitioners' accounts. That is their report, not a measured rate.
Order blocks against supply and demand zones
If you took the DT Intensive, you already draw zones from Day 11, supply and demand. An order block is a stricter, candle-level version of that idea.
| Supply or demand zone | Order block | |
|---|---|---|
| What you mark | The base: one to a few small candles before the move | One candle: the last opposite candle |
| What it needs | A strong move away from the base | Displacement and a break of structure |
| Its edges | Proximal on the base, distal on the far wick | Open to the far wick |
| Its 50% level | Not usually named | The mean threshold, on the body |
| After a close through | The zone has failed | It may become a breaker or a mitigation block |
A fair value gap is different again. A gap is the untraded space between candle 1 and candle 3 of a fast move, and a block is a candle. They often sit side by side, as both examples below show.
Two worked examples
Sample candles built from the course research, not real sessions. Times are New York time (EDT).
Worked example
Example 01: EURUSD M15: a bullish block in the London killzone
The worked example, with every number walked through, is in the app.
Write the block as a rule a stranger could mark
The numbers, and a bearish example
Example 01 in full: the bias is bullish. At 02:45 the down-close candle sweeps the Asian low, 1.08420, to 1.08310. At 03:00 the displacement candle closes at 1.08560, above the 01:30 short-term high of 1.08520.
New York and London change their clocks on different dates, so for about three weeks a year the London open lands an hour later on a New York clock. Linking each block trade to its strategy keeps its win rate and expectancy its own.
Worked example
Example 02: NAS100 M5: a bearish block at the New York open
The worked example, with every number walked through, is in the app.
Check yourself
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