Order Block

An Order Block is a concept from Smart Money Concepts (SMC) and Institutional Order Flow trading that identifies price zones where large institutional players (banks, hedge funds) have placed significant orders. A bullish order block is typically identified as the last bearish (down) candle before a strong bullish impulse move — this represents the zone where institutional buying overwhelmed selling. A bearish order block is the last bullish (up) candle before a strong bearish impulse. The theory is that institutions cannot fill their entire position in one transaction due to the size of their orders, so they accumulate positions at specific price levels. When price returns to these levels, unfilled institutional orders may still be waiting, creating support or resistance. Order blocks are considered valid when: the subsequent move was strong and impulsive, the move broke a significant structure level, and the order block itself hasn't been "mitigated" (revisited and consumed). Traders use order blocks as entry zones, placing limit orders at the block level with stops below (bullish) or above (bearish) the block. While the concept overlaps with traditional supply and demand zones, order block theory emphasizes institutional behavior and market structure.