Weekly Thread #2 ๐งต
Today I will explain exactly how Orderblocks work in high detail
Lets jump in! ๐
Today I will explain exactly how Orderblocks work in high detail
Lets jump in! ๐
1. What are Orderblocks?
OB's are areas where institutions and other big players put large limit orders. This creates an absorption effect once the area is tested and often causes the price to reverse. Orderblocks are one of the key components in my trading system.
OB's are areas where institutions and other big players put large limit orders. This creates an absorption effect once the area is tested and often causes the price to reverse. Orderblocks are one of the key components in my trading system.
2. How to identify order blocks?
There are a lot of different variations, but there are 4 main ones I use.
You always want to use the reversal candle that is the closest to the top/bottom that you can find.
There are a lot of different variations, but there are 4 main ones I use.
You always want to use the reversal candle that is the closest to the top/bottom that you can find.
2.1 Big wick variation
If a the wick on a reversal candle is bigger than 50% of the whole candle, then it is a valid OB.
If a the wick on a reversal candle is bigger than 50% of the whole candle, then it is a valid OB.
2.2 Range variation
This variation requires price to tightly consolidate in a range.
This variation requires price to tightly consolidate in a range.
2.3 Mid trend pause variation
OB's do not always need to be around the extreme points of the market, they can also be mid-trend pauses. This usually work the best when there are few mid trend OB's in a trend.
OB's do not always need to be around the extreme points of the market, they can also be mid-trend pauses. This usually work the best when there are few mid trend OB's in a trend.
2.4 Breaker variation
This one is very simple, once an OB gets pumped/dumped through, then it becomes a Breaker. Simply put, previous resistance is now support if it was a bearish OB.
This one is very simple, once an OB gets pumped/dumped through, then it becomes a Breaker. Simply put, previous resistance is now support if it was a bearish OB.
3. Four main ways to identify if a given OB is high probability
1. Break of Structure
As you can see, after the the top, #btc dumped and went below the past low and broke the market structure. This greatly increases the odds of the OB working out.
1. Break of Structure
As you can see, after the the top, #btc dumped and went below the past low and broke the market structure. This greatly increases the odds of the OB working out.
3.1 You want liquidity to rest before the OB.
Liquidity could be FVG's or Highs/Lows
In this example we had a mid trend OB, then we got a high which did not touch the OB. So in this case there was resting liquidity below the OB. Once we swept it into the OB we dumped.
Liquidity could be FVG's or Highs/Lows
In this example we had a mid trend OB, then we got a high which did not touch the OB. So in this case there was resting liquidity below the OB. Once we swept it into the OB we dumped.
3.1 Example of an FVG below an OB
Here we have a Fair Value Gap before the OB. This increased our chances of successfully shorting the OB, and rest assured we dumped after that.
Here we have a Fair Value Gap before the OB. This increased our chances of successfully shorting the OB, and rest assured we dumped after that.
4. How to enter a trade based of Orderblocks
There are three ways I enter Orderblocks
1. You can enter the OB on the lower part of the OB. This ensures that you will get an entry all of the time. But this lowers your risk/reward ratio because your SL isn't as close to your entry
There are three ways I enter Orderblocks
1. You can enter the OB on the lower part of the OB. This ensures that you will get an entry all of the time. But this lowers your risk/reward ratio because your SL isn't as close to your entry
4.1 Midpoint Variation
2. You can also enter at the midpoint of the Orderblock.
This doesn't always ensure that your order will get filled. but if it does get filled your RR is basically double. Also this is riskier because your SL is very very tight.
2. You can also enter at the midpoint of the Orderblock.
This doesn't always ensure that your order will get filled. but if it does get filled your RR is basically double. Also this is riskier because your SL is very very tight.
4.2 Confirmation variation
3. You can enter once the OB has been rejected. This gives you confirmation that this OB is holding. This makes it way more probable to play out, but the RR is way worse aswell.
For all of these variations, you usually put the SL just above the OB.
3. You can enter once the OB has been rejected. This gives you confirmation that this OB is holding. This makes it way more probable to play out, but the RR is way worse aswell.
For all of these variations, you usually put the SL just above the OB.
Thank you for reading this thread !๐งต
I hope you thourougly enjoyed it and that It gave you some value ๐ซก
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#ct #CryptoTwitter #trading #crypto #thread
I hope you thourougly enjoyed it and that It gave you some value ๐ซก
If you learned something, please consider Liking or Retweeting this thread.
#ct #CryptoTwitter #trading #crypto #thread
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