Learn How to Find The Best Institutional Order Blocks
In this article I will show you how to find the best institutional order blocks to trade from.
We can use this trading strategy either for swing trading, or for orderblock scalping.
In order to make things easier, once again we will work on the Tradingview platform.
In general, what we need is to start from the Daily time frame and then work our way down to the other time-frames. But again, let’s go through this orderblock trading strategy step-by-step.
Identify The Best Institutional Order Blocks
On the Tradingview platform, click 1D and then click enter, or otherwise go on the top left and choose the Daily (1D) time-frame.
Now, I will take you through the strategy step-by-step.
Step 1. Identify break of structure on the Daily time frame
We first need to identify a break of previous structure. On the image above, we can see that the wick of the large red (bearish) candlestick broke the previous structure.
As good as all of this sounds, price action is not always doing us the favor to move as we want it to, or in a perfect way. So, pay attention to this next part because this is the base of our strategy.
We see that price broke previous structure once again and created a new high and a new low. This is the part where you might get confused as to how to find the best institutional order block to trade from.
Now, how do we know that this is the part where price is goin to retrace? Well, we never really know. Nonetheless, in this occasion we broke structure to the upside.
We already know that we are moving in a strong downtrend, and now we are breaking previous structure on the opposite side (see yellow arrow above). Does this mean that we will now move in an uptrend? No, the probabilities are that this is just a retracement. A retracement during which price will test a previous order block.
It is up to us to find the best institutional order block to trade from.
Step 2. This is NOT the best order block to trade from
Even though the order block on the image above could probably give you some opportunity for a short trade on a low timeframe such as the 1 minute timeframe, this is not the one that we will use.
The reason for that is that the second structure is not as important as the first one. This is because of 3 reasons:
- Price did not break a major structure with the second break
- There was not any major liquidity grabbed
- Usually price retraces to a higher level-order block in order to through out those traders who entered too early (in our example this order block which is highlighted on the image above)
Now, I will show you which is the best institutional order block to trade from, and I will analyze the above 3 points in order to give you a more clear understanding of this concept.
Step 3. How to find the best institutional order block
This is the right order block to trade from. If you pay close attention to the price action, you will see that the wick of this red candlestick grabbed the liquidity that was lying above this area. In order to make this more clear, below I post the same image but on the 15 minute time frame.
This is the exact same spot that we saw on the Daily time-frame, but this time on the 15 minute time frame. And this is the right order block to trade from.
As you can see on the image above, we highlight the whole red candlestick which constitutes our order block. Then, we extend this highlighted area and we are waiting for price to get back to this area to retest it. When and if this happens, we will have the opportunity to look for trades.
On the image above, we see that price retraced and came back to the exact area where we had speculated it would. It came back to re-test the “correct” order block. This is where we can find opportunities to enter the market.
But how do we enter a trade in this highlighted area? There are different ways to do so. I will just go through 2 of them.
Pending order in the highlighted order block area
One way to enter a trade, would be with a sell limit order on the 50% level of the highlighted order block area. In order to find the 50% level we can use the Gann Box (check out how to add the Gann Box).
The stop-loss goes above the 0% level (above the highlighted area), while the take profit goes over the previous Daily swing low, since we assume that we will continue with the downtrend. This would give you a 10/1 reward to risk (RR).
But this kind of entry is mostly for those who do not have enough time to spend Infront of the charts. What about Day Traders who have enough time to check out the charts and enter in the most optimal way? Let’s take a look at another type of entry.
Lower time-frame entry in the highlighted order block area
This is the exact same place where we entered with a sell limit order on the Daily time-frame. With this second type of entry, we are entering on the 15 minute timeframe.
We just identify the potential order blocks within the 1 D zone, but on the 15 minute time-frame this time. So, we are waiting for price to retrace to the Daily order block. Then we scale down to the 15 minute time-frame and we are waiting for a new break of structure. We highlight the 2 highest order blocks and we are placing sell limit orders on both of them. Let’s see how it played out in the bigger picture.
In this instance we were activated with the first sell-limit order and from the second highest order block. Again, we target the same place we would target from the Daily timeframe.
With this second type of entry, we managed to turn an original 10/1 RR to a 40/1 RR. This is the magic of top-down analysis. Furthermore, we have to highlight the fact that it took price 8 days to reach back to the 15 minute orderblock. Hence, patience is key!
Here is my video:
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Day trading strategies (including this strategy on how to find the best institutional order blocks) can be very risky if you do not control your emotions and if you do not have a strategy which is giving you a statistical advantage.
It is normal that you will go through periods of consecutive losses and consecutive wins as well. If you want to be able to calculate those aspects of trading in advance and build a robust winning strategy, then you can check out my courses.
In the courses, I teach you elaborate winning trading strategies. Furthermore, I teach you how to build a robust trading plan, starting with the importance of statistics and trading psychology. That way, you can take your trading to the next level.
As with all trading strategies presented here on ChrisFX, if you want to test them out, do so by trading with fake money, or otherwise paper money. NEVER test one of these strategies with real money. When and if you decide to do so, you do so at your own risk and I take zero responsibility for your actions.
Enjoy 🙂
