Order blocks and order flow

The order block, again

An order block is a chunk of orders placed at a particular price, the level where institutional traders showed their interest. A large sell-to-buy block at a price tends to act as support, because there is substantial interest in buying there. On the chart it is the footprint of an institutional order: the last bullish or bearish candle before an impulsive move, refined by some traders to the candle just before the imbalance. The Order blocks lesson covers how to enter on one; this lesson is about what happens after.

What order flow is

Order flow is when you see consecutive banker blocks forming, and consecutive mitigations of those blocks flowing one into the next. Order flow is different from structure. You identify it through institutional candles, imbalances, equal highs and equal lows, and the major highs and lows where liquidity is resting.

Banker blocks

A banker block is the range between the low and the high that broke structure and formed a new low: an order block formed in the process of mitigating a previous one. That banker block becomes the point of interest for the next order block. When price returns to it and clears the mitigation, another banker block forms, and that is order flow.

When flow and structure agree

Bearish order flow inside bearish structure, with a break of structure on every move, is the market agreeing with itself. When order flow tells you one thing and structure tells you another, that is when to be cautious.

When they disagree

Bearish order flow inside bullish market structure tells you a reversal is coming, and the inverse, bullish order flow inside bearish structure, says the same the other way.

The three candles of mitigation

Bearish order flow can be built from any of the three institutional candles: the buy-to-sell candle, the stop-run candle, and the banker block itself. You are always looking for the engulfing candle and the imbalance. Trade only when the market has mitigated structure; there will be days when it does not mitigate and misses, and those days you do not catch the trend. A stop-run candle does not always need to break structure, though it is better when it does, so stay flexible. The best window is the beginning of New York and the crossover with London, around 6:30 AM Eastern, the mitigation window; the London and New York crossover is the session to trade.

Replay the flow

Click the first institutional candle on the Trade Desk and step forward block by block: the replay shows each mitigation as it happened and where your own entries sat inside the flow.