An order block is the last opposing candle before a strong, impulsive move. A bullish order block is the last down candle before a rally; a bearish order block is the last up candle before a sell-off. SMC treats it as the area where large orders were placed to launch the move.
Why order blocks work
The logic is that not all of the institutional orders were filled at the origin, so unfilled orders remain. When price returns to the block, those orders can be completed and the move can resume. A stronger case exists when the departure from the block broke structure and left an imbalance behind.
How to qualify a block
- It should be the last opposing candle before an impulsive, structure-breaking move.
- The move away should be sharp and ideally leave a fair value gap.
- A fresh, untested block reacts more cleanly than one price has already revisited.
- Higher-timeframe blocks aligned with the trend are generally higher quality.
Entry and stop logic
A common entry is a limit order at the block, or waiting for a lower-timeframe confirmation as price taps it. The stop typically sits just beyond the far edge of the block, because closing through it invalidates the idea. Target the next liquidity pool or opposing order block. Order blocks fail regularly, so risk must be fixed and small.
An order block is the last opposing candle before an impulse — enter on a retest with your stop beyond its far edge.