The Institutional Perspective
In retail trading, we are taught that "Support" is where price bounces and "Resistance" is where it falls. But who makes it bounce? Banks, Hedge Funds, and Central Banks do not trade like individuals. They have billions of dollars to deploy.
What is an Order Block (OB)?
An Order Block is a price level where institutional players have stacked their buy or sell orders. When a large bank wants to buy $500 million of EUR/USD, they cannot simply click 'Buy'. If they did, they would slip the market and get a terrible entry price.
Instead, they use Order Blocks. They create a specific price action pattern to accumulate their position without alerting the general market too early.
The "Whale" Footprint
Imagine a whale swimming in a small pond. Every time it moves its tail, it leaves a massive ripple. In the markets, these ripples are our Order Blocks. They are the last defensive moves made by the smart money before a major price expansion.
Bullish vs. Bearish Logic
Bullish OB
The last red candle (sell movement) before a large impulsive move to the upside. It represents where banks sold briefly to trap retail sellers before buying aggressively.
Bearish OB
The last green candle (buy movement) before a large impulsive move to the downside. It represents where institutions 'pushed' the price up one last time to grab liquidty before dumping.
The Concept of "Mitigation"
Institutions often leave some of their orders unfilled, or they might be in a temporary loss on the "trap" candle. Because they cannot lose money, they must bring the price back to that level to close their losing positions at break-even and trigger the remaining boatload of orders. This return to the zone is called Mitigation.
Difference: Supply/Demand vs. Order Block
While often used interchangeably, they are different in refinement. Supply and demand zones are large areas where price has turned. An Order Block is the specific candle at the origin of that move where the heaviest concentration of limit orders resides.
Pro Tip: An Order Block is like a battery. Every time price touches it (mitigates it), it loses some of its power. The first touch is always the strongest and most reliable for a high RR trade.
