How to Identify High-Probability Order Blocks: A Step-by-Step Guide | bait.asia PART 3 Article 2

How to Identify High-Probability Order Blocks (Step-by-Step) PART 3 Article 2

In the world of Smart Money Concepts (SMC), not all price candles are created equal. While retail traders often focus on basic support and resistance, professional institutions—like central banks and hedge funds—leave "footprints" on the chart. These footprints are known as Order Blocks (OB).

What is an Order Block?

An Order Block is a specific candle where large-scale institutional buying or selling has occurred.

• Bullish Order Block: The last "down" candle (sell) before a sharp move upward that breaks the market structure.

• Bearish Order Block: The last "up" candle (buy) before a sharp move downward that breaks the market structure.

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The 4 Pillars of a High-Probability Order Block

To filter out "fake" setups and find high-win-rate zones, an Order Block must meet these four criteria:

1. Break of Structure (BOS)

A valid Order Block must result in a Break of Structure. This means the subsequent price move must break the previous High (in an uptrend) or the previous Low (in a downtrend). If the structure isn't broken, the block has no "power."

2. Presence of Imbalance (Fair Value Gap)

Look for a "Gap" or "Imbalance" immediately following the Order Block. High-probability OBs are followed by large, impulsive candles that leave price inefficiency behind. This confirms that big players entered the market aggressively.

3. Liquidity Sweep

The best Order Blocks are those that "hunted" liquidity before forming. For example, a Bullish OB is much stronger if it first dipped below a previous low to trigger retail "Stop Losses" before surging upward.

4. The "Unmitigated" Rule

An Order Block is most powerful when it is unmitigated, meaning the price has not returned to touch that zone yet. The first time the price returns to an unmitigated OB, the reaction is usually the strongest.

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Step-by-Step Trading Strategy

1. Identify the Zone: Find a candle that caused a BOS and left an Imbalance.

2. Wait for the Return: Do not chase the price. Wait for the price to return to the Order Block (this is called the "Return to Order Block" or RTO).

3. Refine Your Entry: Look for entry at the Open of the OB candle or at the 50% level (Mean Threshold).

4. Set Your Stops: Place your Stop Loss slightly below the wick of a Bullish OB or above the wick of a Bearish OB.

Conclusion

Identifying high-probability Order Blocks is about quality, not quantity. By focusing on zones that have cleared liquidity and broken structure, you align yourself with the "Smart Money."