Why Validation Matters
The biggest mistake retail SMC traders make is marking every single opposite candle they see. This leads to "Over-Analyzing" and unnecessary losses. To trade like an institution, you need a Mechanical Checklist.
Pillar 1: Market Structure Break (BOS / MSB)
For an Order Block to be valid, the move stemming from it must break a significant structural high or low. This is the ultimate proof that the orders were large enough to shift the market's trend.
Rule: If a candle does not cause a break of structure (BOS), it is simply a pullback within a range. Institutional presence is only confirmed when a structural high or low is violated with force.
Pillar 2: Fair Value Gap (FVG) / Imbalance
Displacement creates gaps. When institutions enter, they do it with such intensity that price "skips" levels. A valid Order Block should be followed by a Fair Value Gap.
This gap represents unfilled orders. Price is naturally drawn back to these gaps like a magnet to fill the imbalance before continuing its move. Without an FVG, an Order Block is significantly less likely to provide a strong reaction.
Pillar 3: The "Mean Threshold" Concept
An institutional trader doesn't always enter at the very tip of an OB. The Mean Threshold (MT) is the 50% level of the candle's body (excluding wicks). High-probability setups often see price reacting exactly at this 50% level before continuing the trend.
High Probability Checklist:
- The OB resulted in a Body Break of structure, not just a wick sweep.
- There is a distinct Fair Value Gap left immediately after the OB.
- The OB is sitting in a Higher Timeframe Trend (HTF alignment).
- The candle body is larger than the surrounding retail candles.
