Orderblocks Explained: A form of Support & Resistance
Orderblocks are a form of Supply & Demand Zones and price can commonly find Resistance or Support on them. For those who are new to Technical Analysis; "Support" is a area on the chart price and demand (buying pressure) increases from, with "Resistance" being the opposite, with price decreasing and sellers increasing from the latter.
This makes them a great tool for finding exit or entry points for trades. The above images show how orderbocks are drawn on the Cryptocurrency markets.
To draw and identify Orderblocks first we must find important areas in the chart where price has reversed or broken market structure or and we are looking for small candle bodies in between these large movements to find our order blocks. A zone is drawn across them using the Rectangle tool.
When price revisits these areas (as you can see on the bottom image) it tends to react to it; giving traders a opportunity to capitalise on these movement's. They also are a useful tool for gouging Risk & Price targets as when one Orderblock is "claimed" price tends to head towards the next like a magnet; so they become ideal take profit & SL (Stop Loss) areas.
In this particular image the upper Orderblock was claimed as Support, (the previous resistance) before heading up. In Price Action Trading this would be referred to as a "Support & Resistance Flip" or "S/R Flip" and it can occur in the opposite also with a previous Support being flipped into Resistance.
This makes them a great tool for finding exit or entry points for trades. The above images show how orderbocks are drawn on the Cryptocurrency markets.
To draw and identify Orderblocks first we must find important areas in the chart where price has reversed or broken market structure or and we are looking for small candle bodies in between these large movements to find our order blocks. A zone is drawn across them using the Rectangle tool.
When price revisits these areas (as you can see on the bottom image) it tends to react to it; giving traders a opportunity to capitalise on these movement's. They also are a useful tool for gouging Risk & Price targets as when one Orderblock is "claimed" price tends to head towards the next like a magnet; so they become ideal take profit & SL (Stop Loss) areas.
In this particular image the upper Orderblock was claimed as Support, (the previous resistance) before heading up. In Price Action Trading this would be referred to as a "Support & Resistance Flip" or "S/R Flip" and it can occur in the opposite also with a previous Support being flipped into Resistance.
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