Order block in gold trading

An order block is the last down candle (for a bullish order block) or up candle (bearish) before a strong impulsive move that breaks structure. The Smart Money interpretation is that large participants accumulated or distributed there, leaving unfilled orders that will be defended when price returns. Whether or not that story is literally true, the zone marks where the last pullback ended before the market showed intent, and that is a reasonable place to expect a reaction.

How it applies to gold trading

Order blocks give gold traders a defined entry zone instead of a line. A bullish 1-hour order block at 3,978–3,984, formed by the last red candle before a $40 rally that broke the prior high, becomes a buy zone on the return. The entry is a limit in the zone or a lower-timeframe confirmation inside it; the stop goes below the block; the target is the high the move created or the next liquidity. Blocks are refined by using the candle body rather than the wick, or by using the 15-minute block inside the 1-hour block.

Not every block holds. Blocks that formed with displacement, left a fair value gap, and sit in a discount (for longs) tend to hold more often than blocks in open space.

A common mistake

Marking every red candle before a green candle as an order block. The block must precede a structure break with displacement; without that, it is just a candle.

See also: Breaker block, Mitigation block, Fair value gap, Displacement.

Frequently asked questions