Order Block
Also: OB, bullish order block, bearish order block
A {direction} order block is the lowest candle or price bar with a down close (bullish) / highest candle or price bar with an up close (bearish) that has the most range between open to close and is near a {direction} support/resistance level. Validation occurs when the high of that candle (bullish) / the low of that candle (bearish) is traded through by a later formed candle or price bar. It represents the last institutional footprint before a displacement move and is used as a re-entry level when price retraces.
Identification5
- Locate the lowest down-close candle (bullish) / highest up-close candle (bearish) with the greatest open-to-close range near a {direction} support/resistance level on the higher timeframe (monthly, weekly, or daily).
- Do not use wicks to measure the body range — measure only open to close.
- The candle is only a suspected order block at the time of formation; it is not confirmed until a subsequent candle trades through its high (bullish) / low (bearish).
- When two consecutive down candles (bullish) / up candles (bearish) exist at the level, blend them together as one order block.
- After a rally/decline of at least two to three times the order block body height, the level is eligible for retracement entry.
Entry4
- When price retraces to the {direction} order block after displacement, enter at or near the open (body top for bullish / body bottom for bearish) of the order block candle.
- For limit orders, add approximately five pips above the open (bullish) to account for dealing spread.
- Entry can also be triggered in real time as price touches the order block level — market execution is acceptable.
- If using a lower timeframe (e.g., 5-minute) for refinement, key off the order block candle's open or the high (bullish) / low (bearish) of the body.
Stop2
- Initial stop loss is placed below the low of the bullish order block body (close of the down candle) / above the high of the bearish order block body (close of the up candle).
- After price runs away from the order block, raise the stop to just below the mean threshold (50% of the open-to-close range) to reduce risk.
Target3
- Primary target is external range liquidity — buy stops resting above an old high (bullish) / sell stops resting below an old low (bearish).
- Identify the target on the daily chart first; if there is a confluent weekly or monthly objective, it supports higher odds.
- Take partial profits at intermediate old highs (bullish) / old lows (bearish) visible on the daily chart.
Invalidation3
- Price trading down below the 50% midpoint (mean threshold) of the order block body (open to close) is a warning; the best order blocks do not reach the mean threshold at all.
- Price closing convincingly beyond the order block's far extreme (below the low of a bullish OB body / above the high of a bearish OB body) invalidates the setup.
- A {direction} order block should be avoided when the higher timeframe (monthly/weekly/daily) trend is in the opposite direction — do not trade bearish OBs against a bullish monthly/weekly/daily bias.
Inferred Conditions (Unvalidated)
- Displacement of at least two to three times the order block body height is preferred before seeking a retracement entry — inferred from ICT's 'two to three heights' notation in the file.
ICT Quotes
"someone with a whole lot of money and a whole lot of interest wanting to see higher prices is now in play. They are participating in the marketplace. This is the evidence In price action that you have institutional sponsorship behind the move, large flows or institutional traders have the capacity to move price."
"we as lower grade traders in terms of retail or smaller traders in terms of in respect of a bank or a large entity in an institutional capacity, we can't move the marketplace, but they as a whole, collectively can. So what we do is we wait, we're patiently watching price"
"they're going down to pick up more opportunities to get long at a cheaper price, more discount price."
Timeframes
Version History6 versions
27-ICT Mentorship Core Content - Month 4 - Orderblocks.srt
"Definition of a bullish order block is the lowest candle or price bar with a down close that has the most range between open to close and is near a support level. Validation of a bullish order block i…"
ICT YT - 2022-01-26 - ICT Mentorship 2022 Episode 3.srt
""The order block is a change in the state of delivery. It is NOT just the last up-close candle before a drop. That's what the copycats teach. The order block is the OPENING PRICE of the first candle i…"
SIGNIFICANT DEFINITION CLARIFICATION in 2022 mentorship: (1) Order block redefined as "change in the state of delivery" — the opening price of the FIRST candle in a consecutive run of same-direction candles, NOT just the last candle before the displacement move. (2) Bearish OB = the entire series of consecutive UP-CLOSE candles before bearish displacement. The open of the first up-close candle = key reference level. (3) Bullish OB = the entire series of consecutive DOWN-CLOSE candles before bullish displacement. The open of the first down-close candle = key reference level. (4) Explicit correction of copycat teaching: ICT states the "last candle only" interpretation taught by others is WRONG (Ep 12 live trade walkthrough, Ep 13). (5) Institutional order flow rule (Ep 12): "Up-close candles act as resistance in a bearish market; down-close candles act as support in a bullish market. They should NOT be violated." This is the OB validity criterion for directional trades. (6) High-probability bullish OB requires THREE elements (Ep 13): gap (FVG) + down-close candle + underlying narrative that price is targeting buy-side liquidity. (7) Index futures application: OBs identified on 1h chart for context; refined on 5m–15m for entry. Down-close candles on the hourly that have NOT been violated during a bullish run = valid bullish OBs.
ICT YT - 2024-08-12 - ICT 2024 Mentorship - Lecture 06.srt
"This is for order block fans, okay, my order block does not require to trade below the wick, if I understand the narrative."
2024 WICK RULE RELAXATION: The strict "wick must be traded through" requirement is subordinated to narrative. When directional narrative is clear (bias established, liquidity context confirmed), the opening price of the OB candle is the reference — the wick transgression is not required for validation. This is the most operationally significant 2024 update to the OB definition.
ICT YT - 2024-08-13 - ICT 2024 Mentorship - Lecture 07.srt
"All three of these candles are all one order block, meaning that this order block is not just the last down closed candle before they run up. These three consecutive candles are trading back down into…"
Re-confirms consecutive candle series = entire order block range. Adds nuance: what MAKES the consecutive candles the order block is (a) the FVG below them and (b) the momentum having shifted. The OB is the entire consecutive series, not isolated candles.
ICT YT - 2024-08-14 - ICT 2024 Mentorship - Lecture 08.srt
"consecutively up close candles, that makes the bearish order block. It's not just the last up close candle before down there. That was the trap. I knew people would go out there and start using it and…"
ICT explicitly confirms the "last candle only" interpretation is wrong and was intentionally left as a trap. Re-states that ALL consecutive same-direction candles constitute the OB. Confirms the opening price of the first candle in the series is the key reference level ("as soon as we cross this opening price right there, that means the algorithm has changed, switched script").
ICT YT - 2022-05-27 - ICT Mentorship 2022 Episode 35.srt
""this is what I call the mean threshold mean threshold was taken today. And that to me, bodes well for a continuation to take out this short term high""
Episode 35 adds a new signal interpretation for the mean threshold within order block analysis (bearish OB context): when price reaches the MEAN THRESHOLD of a bearish order block (trades up to the 50% midpoint of the bearish OB candle body), this signals probable continuation THROUGH the OB — price is expected to continue to take out the high above the bearish OB. This is the inverse of the standard interpretation (where the mean threshold is a stop-raise level for the trade in the OB direction). In the bullish continuation scenario, the mean threshold being "taken" is evidence that the bearish OB is failing, and price will run the buy-side liquidity above it. Cross-reference: mean-threshold.yaml 2022 version entry.
Notes
ICT explicitly states that this file is NOT a complete treatise on order blocks — further teaching is promised in later modules of the December 2016 mentorship. The "mean threshold" sub-concept (50% of OB body) is defined within this file and is extracted to its own YAML: mean-threshold.yaml. Timeframe alignment (monthly/weekly/daily bias) is required context before applying any order block entry — bearish OBs are explicitly deprioritised when the higher timeframe is bullish; they serve as profit targets only. 2022 DEFINITION CLARIFICATION — "CHANGE IN STATE OF DELIVERY" (Eps 3, 12, 13): The 2022 mentorship introduces the "change in the state of delivery" framing for order blocks, which CORRECTS an error common in copycat teaching: - WRONG (copycat): "The bullish order block is the last down-close candle before the rally" / "The bearish order block is the last up-close candle before the drop." - RIGHT (ICT 2022): The order block is the ENTIRE consecutive series of same-direction candles before the displacement move. The OPENING PRICE of the FIRST candle in that series is the key reference level. This is NOT a material conflict with the 2016 definition — rather it is an explicit correction and clarification of a commonly misapplied rule. The 2016 file defines "lowest down-close candle with most range" — this is a different (perhaps earlier, simpler) framing. The 2022 "change in state of delivery" approach is more precise and operationally different. Flag for practitioner review. INSTITUTIONAL ORDER FLOW RULE (Ep 12, Ep 13): "In a bullish market: down-close candles should NOT be violated — they act as support. In a bearish market: up-close candles should NOT be violated — they act as resistance." This rule is used for trailing stops and trade management: once price rises above a down-close candle (bullish scenario), the stop can be raised to below that candle. HIGH-PROBABILITY BULLISH OB (Ep 13): Requires ALL THREE of: (1) Down-close candle (OB body), (2) FVG/imbalance adjacent to it, (3) Narrative (higher-timeframe context: price is targeting buy-side liquidity above). "It's the gap plus the down-close candle plus the idea that it's likely going for buy-side liquidity. That's it." See also: displacement.yaml, market-structure-shift.yaml, intermediate-term-high-low.yaml 2024 DEFINITION REFINEMENTS (Lectures 06, 07, 08 — Aug 12-14 2024): (1) WICK RULE RELAXED BY NARRATIVE: ICT explicitly states "my order block does not require to trade below the wick if I understand the narrative" (L06, 01:07:20). The wick-trade-through is NOT the strict requirement — the opening price breach is what validates. This is a material practical change from the 2016 rule which used the high/low of the candle. (2) CONSECUTIVE CANDLES RE-CONFIRMED: L07 and L08 both re-confirm that the bearish OB is the ENTIRE range of consecutive up-close candles — "these three consecutive candles are all one order block" (L07, 02:32:06). The opening price of the FIRST candle in the series remains the key reference. (3) OPEN PRICE = CHANGE IN STATE OF DELIVERY: "This open price, all part of these consecutive candles. That open price is the change in the state of delivery. That means the algorithm sees these three candles and goes right to that opening price." (L07, 02:32:58) (4) VALIDATION BY OPEN BREACH: "When this candle's open price is breached, that validates this order block." (L07, 02:33:37) — confirmed as the activation condition. (5) ENTRY AT OPENING PRICE: The entry is specifically the OPENING PRICE of the OB candle (or the opening price of the first candle in the consecutive series). "That opening price — that's my entry on that candle." (L06, 01:41:04) (6) MEAN THRESHOLD = STOP MANAGEMENT LEVEL: "My risk has to be defined as much as the midpoint or mean threshold of that order block. It does not need to be up here." (L06, 01:40:45) — confirms mean threshold as the maximum stop, not the entry level.